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A company has a contribution margin per unit of $18 and a contribution margin ratio of 40%.  What is the selling price per unit?

a)            $30.00.

b)            $45.00.

c)            $7.20.

d)            Cannot be determined.

2. Fixed costs are $900,000 and the contribution margin per unit is $150.  What is the breakeven point?

a)            $2,250,000.

b)            $6,000,000.

c)            2,250 units.

d)            6,000 units.

3. Just-in-time processing requires

a)            a constant build-up of finished goods inventory just in case unexpected or rush orders are received.

b)            that suppliers of the company be able to deliver on short notice exact quantites of raw materials.

c)            that the quality control system be eliminated so that production is completed, without interruption.

d)            an increase in the level of raw materials inventory, so that production can be completed just-in-time before the delivery date promised.


4. Which of the following manufacturing cost elements occur in a process cost system?

a)            direct materials.

b)            direct labor.

c)            manufacturing overhead.

d)            all of these.


5. If America Airlines cuts its domestic fares by 30%

a)            its fixed costs will decrease.

b)            profit will increase by 30%.

c)            a profit can only be earned by decreasing the number of flights.

d)            a profit can be earned by increasing the number of passengers or by decreasing variable costs.

6. If a company had a contribution margin of $200,000 and a contribution margin ratio of 40%, total variable costs must have been

a)            $300,000.

b)            $120,000.

c)            $500,000.

d)            $80,000.


7. A company desires to sell a sufficient quantity of products to earn a profit of $80,000.  If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $160,000, how many units must be sold to earn the net income of $80,000?

a)            45,000 units.

b)            30,000 units.

c)            24,000 units.

d)            18,000 units.



8. A process with no beginning work in process, completed and transferred out 15,000 units during a period and had 10,000 units in the ending work in process that were 30% complete.  The equivalent units of production for the period was

a)            15,000 equivalent units.

b)            25,000 equivalent units.

c)            18,000 equivalent units.

d)            7,500 equivalent units.

9. If 30,000 units are started into production and 12,000 units are in process at the end of the period, how many units were completed and transferred out?

a)            30,000 units.

b)            12,000 units.

c)            18,000 units.

d)            42,000 units.

10. Which of the following is a limitation of activity based costing?

a)            More cost bases.

b)            Less control over overhead costs.

c)            Poorer management decisions.

d)            Some arbitrary allocations continue.


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