Which one of the following is correct concerning contribution margin?
A. It equals sales revenue minus total costs.
B. It is calculated by subtracting total manufacturing costs from sales revenue.
C. It is calculated by subtracting variable manufacturing costs from sales.
D. It is helpful in determining the effect of changes in sales on net income.
Answer: D
Learn More :
Accounting 2000 Chapter 18
- Simmons Company has required sales of $1,500,000 to meet its target net income. It has fixed costs of $200,000 and the contribution margin ratio is 40%. The company's target net income is
- Bergman Company has total fixed costs of $350,000 and a contribution margin ratio of 20%. Hampton's target net income is $250,000. Sales in dollars to meet the target net income would be
- Required sales in dollars to meet a target net income is computed by dividing
- The mathematical equation for computing required sales to obtain target net income is: Required sales =
- Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?
- Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?
- T/F Target net income is an income objective for individual product lines set by management.
- Maya Company manufactures a product which sells for $20 each. Each unit of product has a variable cost of $5 to manufacture. Fixed costs normally incurred are $60,000. Maya Company is considering automating the manufacturing process, which would require a capital investment which would increase fixed costs by $30,000. As a result of the automation, variable costs would decrease by 20%. What would the new breakeven level in units be for Maya Company if it decides to automate the manufacturing process?
- Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is
- Benson Company produces flash drives for computers which have variable costs of $10 per flash drive to produce. Each flash drive sells for $20 each. During the current month, 1,000 flash drives were sold. Fixed costs for the current month were $4,500. If variable costs increase by 10%, what happens to the breakeven level in units for the month for Benson Company?
- Walden Company expects to sell 500,000 units for $6 per unit. The contribution margin ratio is 30%. If Walden will break even at this level of sales, fixed costs are
- At the break-even point
- The break-even point in dollars is computed by dividing
- The break-even point can be
- Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?
- Brownstone Company's contribution margin ratio is 30%. If Brownstone's sales revenue is $100 greater than its break-even sales in dollars, its net income
- Panera Bread sells a box of bagels for $6 with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales in dollars does Panera Bread need to break-even per year if bagels are its only product?
- Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven?
- T/F The amount of income or loss at each level of sales can be derived from the total sales and total cost lines in a CVP graph.
- T/F At the break-even point, contribution margin equals total variable costs.
- Contribution margin is
- When comparing a traditional income statement to a CVP income statement
- Contribution margin
- What is contribution margin?
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.