1.Crean's Diner produced and sold 4,000 bagels last month and had fixed costs of $10,000.
If production and sales are expected to increase by 5% next month, which of the following statements is true?
A) Total fixed costs will increase.
B) Total fixed costs will decrease.
C) Fixed cost per unit will increase
2) Old Line Hobby is selling a car care product with a contribution margin of 50% on sales of $ 500,000 per year (50,000 units at $ 10 each). The fixed costs are $80,000 per year and inventory levels are declining. If sales increase by 10,000 units in the coming year, how much increase in income is expected?
A) $ 50,000
B) $ 35,000
C) $ 40,000
D) $ 75,000
3) Which of the following statements is correct?
A) At the break-even point, total revenue equals total fixed costs.
B) The contribution margin is fixed costs minus total variable costs.
C) If the contribution margin ratio is 40%, it means that every $1.00 of sales will contribute $0.40 to covering fixed costs and generating a profit.
D) Contribution margin ratio is generally the same as gross margin ratio.
4) Which of the following statements is incorrect?
A) Total production cost is generally a mixed cost.
B) In order to use C-V-P analysis, costs must be broken out into fixed and variable components.
C) The account analysis method is subjective in that different managers viewing the same set of facts may reach different conclusions regarding which costs are fixed and which costs are variable.
D) The account analysis method of estimating fixed and variable costs uses a computer program to fit a line to historical data.