Question 1

The Burr Mystery Dinner Theater sells tickets for dinner and a show for $50 each.The cost of providing dinner is $30 per ticket,and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 15,000 patrons each month.What is the contribution margin per passenger?

Accepted Answer

The contribution margin per ticket is calculated as the selling price per ticket minus the variable cost per ticket. Here, the selling price is $50, and the variable cost (cost of providing dinner) is $30. Therefore, the contribution margin is $50 - $30 = $20.00.

Question 2

Gibbs Company has a product which sells for $100 and has a unit contribution margin of $45.It has fixed costs of $30/unit at the current production volume.Gibbs Company's contribution margin ratio is:

Accepted Answer

Contribution margin ratio = Contribution margin / Sales price= $45 / $100= 0.45 or 45%

Question 3

The Burr Mystery Dinner Theater sells tickets for dinner and a show for $50 each.The cost of providing dinner is $30 per ticket,and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 15,000 patrons each month.What is the projected monthly income if 12,000 patrons visit the theater each month?

Accepted Answer

The answer of  The Burr Mystery Dinner Theater sells...

Question 4

Anthony Office Supplies sells refills on printer ink cartridges for $16 per refill.Variable costs are $4 per refill.Fixed costs are $2,000 per month.What is the contribution margin ratio for the printer ink cartridge refills?

Accepted Answer

The contribution margin ratio is calculated as (Selling Price - Variable Costs) / Selling Price. Here, it is ($16 - $4) / $16 = $12 / $16 = 0.75 or 75%.

Question 5

The breakeven point represents the minimum number of units a company must sell before it earns a profit.

Accepted Answer

The breakeven point is the point at which a company's total revenue equals its total expenses, resulting in neither a profit nor a loss. Any units sold beyond the breakeven point will result in a profit for the company. Therefore, the breakeven point represents the minimum number of units a company must sell before it earns a profit.

Question 6

The Sage Group produces a single product selling for $60 per unit.Variable costs are $12 per unit and total fixed costs are $6,000.What is the contribution margin ratio?

Accepted Answer

Contribution margin ratio = (selling price - variable costs) / selling price

= ($60 - $12) / $60

= $48 / $60

= 0.8 or 80%

Therefore, the contribution margin ratio is 0.80, which is option C.

Question 7

Branson Movies sells movie tickets for $13 per movie patron.Variable costs are $8 per movie patron and fixed costs are $60,000 per month.The company's relevant range extends to 35,000 movie patrons per month.What is Branson's projected operating income if 28,000 movie patrons see movies during a month?

Accepted Answer

Operating income is calculated as (Sales - Variable Costs - Fixed Costs). For 28,000 patrons: Sales = 28,000 * $13 = $364,000; Variable Costs = 28,000 * $8 = $224,000; Fixed Costs = $60,000. Operating Income = $364,000 - $224,000 - $60,000 = $80,000.

Question 8

Express Bus Company operates a bus route that takes passengers from Cleveland to Chicago every day.Assume the bus tickets sell for $50 per rider; the bus line's variable costs are $35 per rider; and its fixed costs are $75,000 each month.What is the contribution margin ratio?

Accepted Answer

The contribution margin per rider is $50 (selling price) - $35 (variable cost) = $15. The contribution margin ratio is $15 / $50 = 0.30 or 30%.

Question 9

The Burr Mystery Dinner Theater sells tickets for dinner and a show for $50 each.The cost of providing dinner is $30 per ticket,and the fixed cost of operating the theater is $100,000 per month.The company can accommodate 15,000 patrons each month.What is the contribution margin ratio?

Accepted Answer

The contribution margin per ticket is $50 (selling price) - $30 (variable cost) = $20. The contribution margin ratio is $20 / $50 = 0.40 or 40%.

Question 10

Only the unit contribution margin approach may be used to calculate the breakeven point.

Accepted Answer

The total contribution margin approach can also be used to calculate the breakeven point. In this approach, the total contribution margin (sales - variable costs) is divided by the total fixed costs to determine the breakeven point in sales dollars or units.

Question 11

On a CVP graph,total fixed costs are shown as a vertical line.

Accepted Answer

Total fixed costs are shown as a horizontal line on a CVP graph, indicating that they do not change with the level of production or sales volume.

Question 12

The breakeven point on a CVP graph is the point where the fixed expenses line intersects the total expense costs line.

Accepted Answer

The breakeven point on a CVP graph is where the total revenue line intersects the total expenses line, not the fixed expenses line.

Question 13

The following selected data relates to Lazarus Corporation: $$\begin{array} { | l | r | } 
\hline \text { Tatal fixed costs } & \$ 22,000 \
\hline \text { Sale price per unit } & \$ 25 \
\hline \text { Variable costs per urit } & \$ 18 \
\hline
\end{array}$$ 
-If sales revenue per unit increases to $27 and 8,000 units are sold,what is the contribution margin?

Accepted Answer

Contribution margin per unit = selling price per unit - variable cost per unit
Given data does not provide variable cost per unit, hence we cannot calculate contribution margin per unit.
Contribution margin = contribution margin per unit * number of units sold
Contribution margin = (27 - variable cost per unit) * 8,000
We do not have variable cost per unit, hence we cannot calculate contribution margin. Therefore, we cannot choose options A, B, or D as they have incorrect values for contribution margin. 
Option C is the best choice, as it is the only option that we cannot eliminate based on given data.

Question 14

Express Bus Company operates a bus route that takes passengers from Cleveland to Chicago every day.Assume the bus tickets sell for $50 per rider; the bus line's variable costs are $35 per rider; and its fixed costs are $75,000 each month.What is the contribution margin per rider?

Accepted Answer

Contribution margin per rider = Sales price - Variable costs per rider 
= $50 - $35 
= $15

Therefore, the contribution margin per rider is $15.00.

Question 15

On a CVP graph,the vertical distance between the total expense line and the total fixed cost line equals the operating income or operating loss.

Accepted Answer

The vertical distance between the total expense line and the total fixed cost line on a CVP graph represents the variable costs, not the operating income or loss. Operating income or loss is determined by the difference between total revenue and total expenses.

Question 16

Anthony Office Supplies sells Refills on printer ink cartridges for $16 per refill.Variable costs are $4 per refill.Fixed costs are $2,000 per month.What is the contribution margin per refill?

Accepted Answer

The answer of  Anthony Office Supplies sells Refills on...

Question 17

First Robotics Company sells basic kits to build robots for $112 each.The variable costs for each kit are $72.The total contribution margin for 20 kits is:

Accepted Answer

The answer of  First Robotics Company sells basic kits...

Question 18

Mario's Pizza sells pizzas for $10.The variable costs for each pizza are $4,while the total fixed costs are $1,500.The contribution margin for 1,000 pizzas is:

Accepted Answer

The contribution margin per pizza is the selling price per pizza ($10) minus the variable cost per pizza ($4) which is $6.

Contribution margin for 1,000 pizzas = 1,000 (pizzas) x $6 (contribution margin per pizza) = $6,000.

To calculate the contribution margin, we do not take fixed costs into consideration since they are not related to the production of individual pizzas. Hence, option A and D can be eliminated.

Option B can be eliminated since it only considers the variable costs and not the contribution margin.

Therefore, the correct answer is C.

Question 19

The following selected data relates to Lazarus Corporation: $$\begin{array} { | l | r | } 
\hline \text { Tatal fixed costs } & \$ 22,000 \
\hline \text { Sale price per unit } & \$ 25 \
\hline \text { Variable costs per urit } & \$ 18 \
\hline
\end{array}$$
- Assuming 8,000 units are sold,what is the contribution margin?

Accepted Answer

The contribution margin per unit is calculated as the sale price per unit minus the variable cost per unit, which is $25 - $18 = $7. For 8,000 units, the total contribution margin is 8,000 units * $7 = $56,000.

Question 20

During the past year,Pettay Enterprises had the following fixed costs:
 $$\begin{array} { | l | l | } 
\hline \text { Fixed manufacturing costs } & \$ 112,000 \
\hline \text { Fixed marketing costs } & \$ 43,000 \
\hline \text { Fixed administrative costs } & \$ 18,000 \
\hline
\end{array}$$ The company also had the following variable costs:
 $$\begin{array} { l l } 
\text { Variable manufacturing costs } & \$ 142,000 \
\text { Variable marketing costs } & \$ 37,000 \
\text { Variable adrinistrative costs } & \$ 28,000
\end{array}$$ During the year,the company produced and sold 60,000 units of the product at a selling price of $7.00 per unit.The company had no inventory at the beginning of the year.
Required: Prepare a contribution margin income statement for the year.

Accepted Answer

The answer of  During the past year,Pettay Enterprises had...

Quiz 7: Cost-Volume-Profit Analysis