Unit 10: Marginal Costing and Profit Planning - Practice Quiz

1 Marginal cost is best defined as the:

2 In marginal costing, which costs are charged to products?

3 Under marginal costing, fixed costs are treated as:

4 Contribution is calculated as:

5 Which of the following is an objective of marginal costing?

6 The relationship among cost, volume, and profit is expressed by the formula:

7 CVP analysis studies the relationship between:

8 The Profit-Volume (P/V) ratio is calculated as:

9 Margin of safety is the excess of:

10 Which of the following assumptions is made in CVP analysis?

11 If the P/V ratio is 40%, the variable cost to sales ratio is:

12 An increase in the selling price per unit, other things being constant, will cause the P/V ratio to:

13 The break-even point is the level of activity where:

14 The break-even point in units is calculated as:

15 The break-even point in terms of sales value is calculated as:

16 At the break-even point, the amount of profit earned is:

17 If fixed costs are and contribution per unit is , the break-even point in units is:

18 In a break-even chart, the point where the total cost line intersects the total sales line represents the:

19 Other things remaining constant, an increase in fixed costs will cause the break-even point to:

20 The angle formed between the sales line and the total cost line at the break-even point is known as the:

21 Under marginal costing, which of the following costs is charged to products?

22 A firm treats fixed costs as period costs and values inventory only at variable cost. Which costing technique is being applied?

23 Which objective is best served by marginal costing when a firm must decide whether to accept a special order below normal price?

24 Contribution under marginal costing is defined as:

25 If selling price per unit is and variable cost per unit is , the P/V ratio is:

26 A company has a P/V ratio of and fixed costs of . What sales are required to earn a profit of ?

27 In CVP analysis, if fixed costs increase while selling price and variable cost per unit stay constant, the break-even point will:

28 The margin of safety can be expressed as:

29 A firm's profit is and P/V ratio is . Its margin of safety in sales value is:

30 Which of the following assumptions is NOT part of CVP analysis?

31 If contribution is and sales are , and fixed cost is , the profit equals:

32 A company increased its selling price by with no change in costs. The P/V ratio will:

33 Fixed costs are , selling price is per unit, and variable cost is per unit. The break-even point in units is:

34 At the break-even point, which of the following is true?

35 Fixed cost is and P/V ratio is . The break-even sales value is:

36 On a break-even chart, the point where the total cost line intersects the total sales line represents the:

37 The angle of incidence on a break-even chart indicates:

38 A product sells at , has variable cost of , and fixed cost of . How many units must be sold to earn a profit of ?

39 If the margin of safety is and total sales are , the break-even sales are:

40 If both selling price and variable cost per unit rise by the same rupee amount while fixed cost stays constant, the break-even point in units will:

41 A firm reports sales of , variable costs of and fixed costs of . What is the Break-Even Point in sales value?

42 A company has a P/V ratio of and fixed costs of . If fixed costs rise to , by how much does the Break-Even sales value increase?

43 A product sells at with variable cost per unit and fixed costs of . If the selling price is raised by with no other change, what is the new Break-Even Point in units?

44 Product X has sales of (P/V ratio ) and Product Y has sales of (P/V ratio ). Total fixed cost is . What is the composite Break-Even Point in sales value?

45 Fixed costs are , P/V ratio is and the tax rate is . What sales are required to earn an after-tax profit of ?

46 A firm earns a profit of and its P/V ratio is . What is its Margin of Safety in sales value?

47 On a break-even chart, the 'angle of incidence' formed between the sales line and the total cost line beyond BEP indicates:

48 Total fixed costs are , which include depreciation of . If the P/V ratio is , what is the cash Break-Even Point in sales value?

49 Year 1: sales , profit . Year 2: sales , profit . Assuming cost structure is unchanged, what is the Break-Even sales value?

50 A firm has contribution of , fixed cost of and profit of . What is its Degree of Operating Leverage (DOL)?

51 Machine A has fixed cost and variable cost /unit; Machine B has fixed cost and variable cost /unit. At what output are total costs equal (indifference point)?

52 Under a limiting-factor situation where machine hours are scarce, the ranking of products for maximum profit should be based on:

53 In the short run, a firm should consider shutting down operations when:

54 Which of the following is NOT an objective or feature of marginal costing?

55 In marginal costing, 'marginal cost' of a product is best described as:

56 A product sells at with variable cost per unit and fixed cost . What is the Break-Even Point in units?

57 A product sells at , variable cost /unit, fixed cost . If variable cost rises to /unit, by how many units does the Break-Even Point change?

58 Given that Margin of Safety ratio is and the P/V ratio is , the profit as a percentage of sales equals:

59 A firm has sales of , P/V ratio and fixed cost . What is the Margin of Safety ratio?

60 A multi-product firm shifts its sales mix so that a larger proportion of sales comes from a product with a higher P/V ratio, with total fixed cost unchanged. The composite Break-Even Point will: