Managerial Accounting Chapter 19 Quiz

Questions and Answers

The CVP income statement classifies costs:

as variable or fixed and computes contribution margin (correct)

as variable or fixed and computes gross profit

by function and computes a gross profit

by function and computes a contribution margin

Contribution margin is the amount of revenue remaining after deducting:

fixed costs

contra-revenue

cost of goods sold

variable costs (correct)

Concord's CVP income statement included sales of 3500 units, a unit selling price of $300, unit variable cost of $180, and fixed expenses of $110,000. Net income is:

$420,000

$310,000 (correct)

$520,000

$1,050,000

The contribution margin ratio is:

contribution margin divided by sales dollars Signup and view all the answers

Sales mix is:

the relative percentage in which a company sells its multiple products Signup and view all the answers

What is the key factor in determining sales mix if a company has limited resources?

Contribution margin per unit of limited resource Signup and view all the answers

The margin of safety ratio:

indicates what percent decline in sales could be sustained before the company would operate at a loss Signup and view all the answers

The degree of operating leverage:

is computed by dividing total contribution margin by net income Signup and view all the answers

Which cost is NOT charged to product under variable costing?

Fixed manufacturing overhead Signup and view all the answers

Net income under variable costing is contribution margin less:

fixed manufacturing overhead and fixed selling administrative expenses Signup and view all the answers

Net income under absorption costing is higher than net income under variable costing:

when units produced exceed units sold Signup and view all the answers

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using:

variable costing Signup and view all the answers

Companies recognize fixed manufacturing overhead costs as period costs when incurred when using:

variable costing Signup and view all the answers

Bramble Corp. sells 5720 units of Product A and 7280 units of Product B annually. The sales mix for Product A is:

44% Signup and view all the answers

Concord Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 80% for Sporting Goods and 20% for Sports Gear, as determined by total sales dollars. The contribution margin ratio for Sporting Goods is 25%, while for Sports Gear it is 60%. The weighted-average contribution margin ratio is:

32.00% Signup and view all the answers

Study Notes

CVP Income Statement

Classifies costs as variable or fixed, calculating contribution margin.

Contribution Margin

Represents revenue left after deducting variable costs.

Net Income Calculation

Given 3,500 units sold at $300 unit price and $180 unit variable cost, net income is $310,000.
Formula used: (Unit Selling Price - Unit Variable Cost) x Units Sold - Fixed Expenses.

Contribution Margin Ratio

Calculated by dividing contribution margin by total sales dollars.

Sales Mix

Defined as the relative percentage of a company's total product sales.

Key Factor in Sales Mix

The contribution margin per unit of limited resource is critical when resources are restricted.

Margin of Safety Ratio

Indicates the percentage decline in sales a company can withstand before incurring losses.

Degree of Operating Leverage

Computed by dividing total contribution margin by net income, assessing earnings volatility.

Variable Costing

Does not include fixed manufacturing overhead in product costs.

Net Income under Variable vs. Absorption Costing

Variable costing includes contribution margin less fixed manufacturing overhead and fixed selling/admin expenses.
Absorption costing yields higher net income than variable costing when production exceeds sales.

Product Costs in Variable Costing

Only direct materials, direct labor, and variable manufacturing overhead are considered product costs.

Fixed Manufacturing Overhead Costs

Recognized as period costs under variable costing.

Sales Mix Example

Bramble Corp. sells 5,720 units of Product A and 7,280 of Product B; Product A’s sales mix is 44% calculated by dividing its units sold by total units sold.

Weighted-Average Contribution Margin Ratio

For Concord Corporation with a sales mix of 80% sporting goods (25% contribution margin) and 20% sports gear (60% contribution margin), the weighted-average contribution margin ratio is 32%.
Formula: (Sales Mix x Contribution Margin for each product).

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Description

Test your knowledge on key concepts from Chapter 19 of managerial accounting. This quiz focuses on the classification of costs and contribution margin calculations. Explore your understanding of income statements and their implications in business decision-making.