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1. The ratio of fixed expenses to the contribution margin ratio is the a. indifference point. b. break-even point in units. c. fixed cost ratio. d. break-even point in sales. e. sensitivity analysis.

2.. If the contribution margin per unit decreases, the break-even point in units a. will increase. b. will decrease. c. will remain the same. d. cannot be determined from the information given.

3. The income statement for Thomas Manufacturing Company for the current year is as follows: Sales (10,000 units) $120,000 Variable expenses 72,000 Contribution margin $ 48,000 Fixed expenses 36,000 Operating income $ 12,000 What is the contribution margin per unit? a. $7.20 b. $1.20 c. $4.80 d. $120,000

4. Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit? a. 25% b. 40% c. 75% d. 60%

5. If the contribution margin ratio increases, the break-even point in sales dollars will a. increase. b. decrease. c. remain the same. d. double.

6. Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the sales dollars level required to break even at the old price of $7.50? a. $75,000 b. $12,000 c. $18,000 d. $50,000

7. If fixed costs increase, the break-even point in units will a. increase. b. decrease. c. remain the same. d. remain the same; however, contribution per unit will decrease.

Figure 4-2. Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.

8. Refer to Figure 4-2. What is the break-even point in hours? (Round to the nearest whole hour.) a. 2,229 b. 1,393 c. 3,714 d. 5,571 e. 12,000

9. Refer to Figure 4-2. What is the break-even point in sales dollars? a. $130,000 b. $195,000 c. $252,000 d. $420,000 e. $342,000

10. Refer to Figure 4-2. What is the contribution margin ratio? a. 67% b. 60% c. 40% d. 33% e. 50%

11. Refer to Figure 4-2. What is the contribution margin per hour? a. $21 b. $35 c. $14 d. $56 e. $6.50

12. Refer to Figure 4-2. What is the variable cost ratio? a. 50% b. 40% c. 33% d. 67% e. 60%

13. Refer to Figure 4-2. What is the budgeted operating income? a. $342,000 b. $174,000 c. $168,000 d. $90,000 e. $420,000

Figure 4-3. Paney Company makes calendars. Information on cost per unit is as follows: Direct materials $1.50 Direct labor 1.20 Variable overhead 0.90 Variable marketing expense 0.40 Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

14. Refer to Figure 4-3. What is the contribution margin per unit? a. $6.30 b. $5.00 c. $6.40 d. $6.00 e. $5.40

Figure 4-8. A company provided the following data: Sales $540,000 Variable costs 378,000 Fixed costs 120,000 Expected production and sales in units 40,000 units

15. Refer to Figure 4-8. What is the break-even point in sales dollars? a. $498,000 b. $400,000 c. $171,429 d. $112,500 e. $150,000

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