Question 1

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each), the effect of the quantity factor on the change in contribution margin is:
A) $10,800 decrease
B) $10,800 increase
C) $10,000 increase
D) $10,000 decrease

Accepted Answer

The answer of If variable cost of goods sold totaled...

Question 2

The systematic examination of the differences between planned and actual contribution margin is
A) gross profit analysis
B) contribution margin analysis
C) sales mix analysis
D) volume variance analysis

Accepted Answer

Contribution margin analysis is the systematic examination of the differences between planned and actual contribution margins. It helps in understanding how deviations in sales and production levels affect the profitability of a company.

Question 3

In contribution margin analysis, the unit price or unit cost factor is computed as:
A) the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by the planned quantity sold
B) the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by the actual quantity sold
C) the difference between the actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost
D) the difference between the actual quantity sold and the planned quantity sold, multiplied by the actual unit sales price or unit cost

Accepted Answer

In contribution margin analysis, the unit price or unit cost factor is calculated as the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by the actual quantity sold. This is because the unit price or cost variance is based on the variance between the actual and planned quantities sold, as well as the actual and planned unit prices or costs. Therefore, the unit price or cost factor must be adjusted based on the actual quantity sold. Choice B reflects this calculation method.

Question 4

If variable selling and administrative expenses totaled $124,000 for the year 80,000 units at $1.55 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each), the effect of the quantity factor on the change in contribution margin is:
A) $3,000 increase
B) $3,500 decrease
C) $3,000 decrease
D) $3,500 increase

Accepted Answer

To calculate the effect of the quantity factor on the change in contribution margin, we need to use the following formula:

Contribution Margin = Sales - Variable Costs
Contribution Margin per unit = Sales price per unit - Variable cost per unit

First, we can calculate the contribution margin per unit for each scenario:

Contribution margin per unit for year: $1.55 - $0 = $1.55
Contribution margin per unit for planned year: $1.75 - $0 = $1.75

Next, we can calculate the contribution margin for each scenario:

Contribution margin for year: 80,000 units * $1.55 = $124,000
Contribution margin for planned year: 78,000 units * $1.75 = $136,500

Now we can see that the planned quantity is lower than the actual quantity (78,000 vs. 80,000). However, the contribution margin per unit is higher for the planned year.

To calculate the effect of the quantity factor, we can use the following formula:

Effect of quantity factor = (Planned quantity - Actual quantity) * Contribution margin per unit

Effect of quantity factor = (78,000 - 80,000) * $1.75 = -$3,500

The negative sign indicates that the decrease in quantity has led to a decrease in contribution margin. Therefore, the answer is B, $3,500 decrease.

Question 5

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:
Morristown & Co.
Absorption Costing Income Statement
For Month Ended October 31, 20-  If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using variable costing.

Accepted Answer

The answer of On October 31, the end of the...

Question 6

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the unit cost factor on the change in contribution margin is:
A) $12,000 increase
B) $5,750 decrease
C) $12,000 decrease
D) $5,750 increase

Accepted Answer

The answer of If variable cost of goods sold totaled...

Question 7

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the quantity factor on the change in contribution margin is:
A) $5,000 decrease
B) $5,000 increase
C) $5,750 increase
D) $5,750 decrease

Accepted Answer

The contribution margin per unit can be calculated as follows:
- Current contribution margin per unit = Price per unit - Variable cost per unit = $5.00 - $0.00 = $5.00
- Planned contribution margin per unit = Price per unit - Variable cost per unit = $5.75 - $0.00 = $5.75

Using these figures, the change in the contribution margin due to the quantity factor can be calculated as follows:
- Current contribution margin = 16,000 units x $5.00 = $80,000
- Planned contribution margin = 15,000 units x $5.75 = $86,250
- Change in contribution margin = Planned contribution margin - Current contribution margin = $86,250 - $80,000 = $6,250
- However, this increase in contribution margin is due to a higher price per unit rather than a higher quantity of units sold. Therefore, we need to adjust for the price increase to isolate the effect of the quantity factor.
- Adjusted planned contribution margin = 15,000 units x $5.00 = $75,000
- Adjusted change in contribution margin = Adjusted planned contribution margin - Current contribution margin = $75,000 - $80,000 = -$5,000

Therefore, the effect of the quantity factor on the change in contribution margin is a decrease of $5,000. The correct answer is D.

Question 8

Philadelphia Company has the following information for March:  Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Philadelphia Company.

Accepted Answer

The answer of Philadelphia Company has the following information for...

Question 9

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each), the effect of the quantity factor on the change in sales is:
A) $20,500 increase
B) $20,000 decrease
C) $20,500 decrease
D) $20,000 increase

Accepted Answer

The answer of If sales totaled $800,000 for the year...

Question 10

Edna's Chocolates had planned to sell chocolate covered strawberries for $3.00 each. Due to various factors, the actual price was $2.75. Edna's was able to sell 1,000 more strawberries than the anticipated 4,000. What is 1) the quantity factor and 2) the price factor for sales?
A) 1) $3,000, 2) $1,250)
B) 1) $3,000, 2) $3,000)
C) 1) $1,250, 2) $3,000
D) 1) $4,000) 2) $3,000)

Accepted Answer

The answer of Edna's Chocolates had planned to sell chocolate...

Question 11

Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and b) the difference in variable costing and absorption costing income from operations.

Accepted Answer

The answer of Fixed costs are $10 per unit and...

Question 12

Tony's Company has the following information for March: $$\begin{array} { | l | c | } 
\hline \text { Sales } & \$ 1,000,000 \
\hline \text { Variable cost of goods sold } & 490,000 \
\hline \text { Fixed manufacturing costs } & 170,000 \
\hline \text { Variable selling and administrative expenses } & 112,000 \
\hline \text { Fixed selling and admini strative expenses } & 100,000 \
\hline
\end{array}$$ Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Tony's Company.

Accepted Answer

The answer of Tony's Company has the following information for...

Question 13

If variable selling and administrative expenses totaled $120,000 for the year 80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each), the effect of the unit cost factor on the change in contribution margin is:
A) $19,500 decrease
B) $19,500 increase
C) $20,000 decrease
D) $20,000 increase

Accepted Answer

To calculate the effect of the unit cost factor, we need to use the formula:

Effect = (Planned variable expenses - Actual variable expenses)

Here, Planned variable expenses = 78,000 units x $1.75 = $136,500 
Actual variable expenses = 80,000 units x $1.50 = $120,000

So, the effect is:

Effect = ($136,500 - $120,000) = $16,500

This means that the planned variable expenses are higher than the actual expenses by $16,500. Since variable expenses are deducted from sales to calculate contribution margin, a decrease in variable expenses would lead to an increase in contribution margin.

Now, to find the effect of the unit cost factor on this difference, we need to multiply the effect by the difference in unit cost:

Unit cost difference = $1.75 - $1.50 = $0.25

Hence, the effect of the unit cost factor is:

Effect of unit cost factor = $16,500 x $0.25 = $4,125

This means that for every $0.25 increase in unit cost, the contribution margin decreases by $4,125.

To find the change in contribution margin due to the unit cost factor, we need to multiply the total unit increase by the effect of unit cost factor:

Total unit increase = 78,000 – 80,000 = -2,000 (negative because it's a decrease)

Hence, the change in contribution margin is:

Change in contribution margin = -2,000 x $4,125 = -$8,250

This means that the contribution margin decreases by $8,250 due to the decrease in unit sales and increase in unit cost.

To find the total effect, we need to add the effect of the unit sales factor (which we calculated separately) to this:

Total effect = $8,000 (effect of unit sales factor) - $8,250 (effect of unit cost factor) = -$250

Since the total effect is negative, it means that the contribution margin has decreased due to the changes in unit sales and unit cost. The answer is (D) $20,000 increase because the question asks about the effect of the unit cost factor, and the effect of the unit sales factor is given separately.

Question 14

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each), the effect of the unit cost factor on the change in contribution margin is:
A) $6,400 decrease
B) $6,400 increase
C) $7,200 increase
D) $7,200 decrease

Accepted Answer

The answer of If variable cost of goods sold totaled...

Question 15

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each), the effect of the unit price factor on the change in sales is:
A) $19,500 decrease
B) $19,500 increase
C) $20,000 decrease
D) $20,000 increase

Accepted Answer

The answer of If sales totaled $800,000 for the year...

Question 16

On what effects does contribution margin analysis focus?
A) the quantity factor
B) the unit cost factor
C) the unit sales price factor
D) all of the above

Accepted Answer

Contribution margin analysis focuses on all three factors - quantity, unit cost and unit sales price, in order to determine the profitability of a product or service. Therefore, the correct answer is D, "all of the above".

Question 17

In which of the following types of firms would it be appropriate to prepare contribution margin reporting and analysis?
A) boat manufacturing
B) a chain of beauty salons
C) home building
D) all of the above

Accepted Answer

Contribution margin reporting and analysis is relevant for all types of firms, regardless of the industry or sector they operate in. It is a key financial tool for understanding the profitability of individual products, services or business lines, and can inform decision-making around pricing, cost control and resource allocation. Therefore, it would be appropriate to prepare contribution margin reporting and analysis for all types of firms, including boat manufacturing, a chain of beauty salons, and home building.

Question 18

Which of the following causes the difference between the planned and actual contribution margin?
A) an increase or decrease in the amount of sales
B) an increase in the amount of variable costs and expenses
C) a decrease in the amount of variable costs and expenses
D) all of the above

Accepted Answer

The difference between the planned and actual contribution margin can be caused by any or all of the factors listed in options A, B, and C. If sales are higher or lower than anticipated, this will affect the contribution margin. Additionally, if variable costs and expenses increase or decrease, this will also impact the contribution margin. Therefore, all of the options may cause a difference between the planned and actual contribution margin.

Question 19

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:  a) Prepare an income statement using absorption costing.
b) Prepare an income statement using variable costing.

Accepted Answer

The answer of On January 1 of the current year,...

Question 20

Which of the following would not be an appropriate activity base for cost analysis in a service firm?
A) lawns mowed
B) inventory produced
C) customers served
D) haircuts given

Accepted Answer

"Inventory produced" is not applicable to a service firm, as it is not producing physical goods. The other options (lawns mowed, customers served, haircuts given) are all activities that can be used as a basis for cost analysis in a service firm.

Quiz 20: Variable Costing for Management Analysis

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each) , the effect of the quantity factor on the change in contribution margin is:

The systematic examination of the differences between planned and actual contribution margin is

In contribution margin analysis, the unit price or unit cost factor is computed as:

If variable selling and administrative expenses totaled $124,000 for the year 80,000 units at $1.55 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each) , the effect of the quantity factor on the change in contribution margin is:

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each) , the effect of the unit cost factor on the change in contribution margin is:

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each) , the effect of the quantity factor on the change in contribution margin is:

Philadelphia Company has the following information for March: Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Philadelphia Company.

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each) , the effect of the quantity factor on the change in sales is:

Edna's Chocolates had planned to sell chocolate covered strawberries for $3.00 each. Due to various factors, the actual price was $2.75. Edna's was able to sell 1,000 more strawberries than the anticipated 4,000. What is 1) the quantity factor and 2) the price factor for sales?

If variable selling and administrative expenses totaled $120,000 for the year 80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each) , the effect of the unit cost factor on the change in contribution margin is:

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each) , the effect of the unit cost factor on the change in contribution margin is:

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each) , the effect of the unit price factor on the change in sales is:

On what effects does contribution margin analysis focus?

In which of the following types of firms would it be appropriate to prepare contribution margin reporting and analysis?

Which of the following causes the difference between the planned and actual contribution margin?

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: a) Prepare an income statement using absorption costing. b) Prepare an income statement using variable costing.

Which of the following would not be an appropriate activity base for cost analysis in a service firm?