Questions -
Q1. Doughton Bearings produces ball bearings for industrial equipment. In evaluating the financial data from the previous year, the management accountant has determined that the company's selling price per unit is $25, while the variable cost per unit is $18. What is the contribution margin per unit?
a. $5.00
b. $6.00
c. $7.25
d. $7.00
Q2. Felton Paper produces paper for textbooks. Felton plans to produce 500,000 cases of paper next quarter to sell at a price of $100 per case. The variable cost per case, including both manufacturing and selling costs, is $80. What is the total contribution margin for next quarter?
a.$10,000,000
b. $ 1,000,000
c. $10,400,000
d. $15,000,500
Q3. Scott Power produces batteries. Scott has determined its contribution margin to be $8 per battery and its contribution margin ratio to be 0.4. What is the effect on profits of the sale of one additional battery? Of one additional dollar of sales?
Additional Battery Additional Dollar of sales
a. $4.00 $.40
b. $10.04 $.20
c. $8.00 $.40
d. $10.40 $.20
Q4. Franklin Cards sells greeting cards for $2 each and plans to sell 100,000 cards every quarter.
The management accountant has determined the company must sell 80,000 cards every quarter to break even. What is the margin of safety (MOS), in units and in sales dollars?
Units/Dollars
a. 10,000/$20,000
b. 5,000/$10,000
c. 40,000/$60,000
d. 20,000/$40,000
Q5. May Clothing is a retail men's clothing store. May's variable cost is $20 per shirt and the sales price is $40 per shirt. May plans to sell 400,000 shirts for the year and at this level would generate a before tax profit of $2,500,000. What is the degree of operating leverage (DOL) at this volume level?
a. 5.5
b. 6.5
c. 8.6
d. 3.2