If a company is currently operating at its breakeven point- which of t.docx

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If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored.) A) If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. B) If sales increase by 20%, net income will also increase by 20%, assuming fixed costs are not equal to zero. C) If variable costs double, net income will decrease by 50%. D) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. Solution If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored.) d) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. Note : If fixed costs increase, net income will decrease by the amount increases in fixed costs If sales increase by 20%, Contribution Margin will also increase by 20% and net income will also increase by 20% of Contribution Margin If variable costs double, net income will decrease by what % cannot be calculated Net income will decrease =Â Â decrease in number of units sold * contribution margin per unit. .

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d) Net income will decrease by the decrease in number of units sold times the contribution
margin per unit.
Note :
If fixed costs increase, net income will decrease by the amount increases in fixed costs
If sales increase by 20%, Contribution Margin will also increase by 20% and net income will
also increase by 20% of Contribution Margin
If variable costs double, net income will decrease by what % cannot be calculated
Net income will decrease =Â Â decrease in number of units sold * contribution margin per unit.

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Conversion cost consists of which of the following? Direct labor and manufacturing overhead cost. Direct materials and direct labor cost. Manufacturing overhead cost. Direct labor cost. 2. East Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio? Option C Option D Option B Option A 3. Which of the following three statements are correct? I. A profit center has control over both cost and revenue. II. An investment center has control over invested funds, but not over costs and revenue. III. A cost center has no control over sales. Only II. Only I and III. Only I and II. Only I. 4. Which of the following costs is an example of a period rather than a product cost? Depreciation on production equipment. Wages of salespersons. Wages of production machine operators. Insurance on production equipment. 5. An increase in the discount rate will result in an increase in the present value of a given cash flow. True False 6. The purpose of the Data Processing Department of Falena Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would best be evaluated as a: revenue center. investment center. cost center. profit center. Top of Form 7. Which of the following represents the normal sequence in which the indicated budgets are prepared? Sales, Balance Sheet, Direct Labor Production, Manufacturing Overhead, Sales Production, Cash, Income Statement Direct Materials, Cash, Sales Bottom of Form 8. The wages of factory maintenance personnel would usually be considered to be: Option D Option C Option B Option A 9. Horizontal analysis involves comparing two or more years' financial data for a single company. True False 10. For a given level of sales, a low contribution margin ratio will produce less net operating income than a high contribution margin ratio. True False 11. Manufacturing overhead consists of: indirect materials but not indirect labor. indirect labor but not indirect materials. all manufacturing costs, except direct materials and direct labor. all manufacturing costs. Net income/Cost of goods sold 12. The formula for the gross margin percentage is: (Sales - Cost of goods sold)/Cost of goods sold (Sales - Cost of goods sold)/Sales Net income/Sales Net income/Cost of goods sold 13. Which of the following statements is not correct? The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before pr.

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