21. The break-even point is the level of activity at which operating income is equal to cost of goods sold.
22. The contribution margin is the amount by which revenue exceeds variable costs.
23. Contribution margin ratio is equal to contribution margin per unit divided by unit sales price.
Multiple Choice Questions
24. When volume increases, fixed costs per unit:
A. Increase.
B. Decrease.
C. Stay the same.
D. Increase or decrease, depending upon the situation.
25. In cost-volume-profit analysis, income tax expense:
A. Is included among the monthly operating expenses as a variable cost.
B. Is considered a fixed cost of doing business.
C. Is treated as a semi-variable cost that is partially dependent upon sales volume.
D. Is generally ignored.
26. A semi-variable cost:
A. Increases and decreases directly and proportionately with changes in volume.
B. Changes in response to a change in volume, but not proportionately.
C. Increases if volume increases, but remains constant if volume decreases.
D. Changes inversely in response to a change in volume.
27. Which of the following is an example of a fixed cost for an airline?
A. Depreciation on the corporate headquarters.
B. Fuel costs.
C. Income taxes expense.
D. Passengers' meals.
28. In order to calculate break-even sales units, fixed costs are divided by the:
A. Contribution margin per unit.
B. Contribution margin percentage.
C. Target operating income.
D. Sales volume.
29. A company's relevant range of production is:
A. The production range from zero to 100% of plant capacity.
B. The production range over which CVP assumptions are valid.
C. The production range beyond the break-even point.
D. The production range that covers fixed but not variable costs.
30. The break-even point in a cost-volume-profit graph is always found:
A. At 50% of full capacity.
B. At the sales volume resulting in the lowest average unit cost.
C. At the volume at which total revenue equals total variable costs.
D. At the volume at which total revenue equals total fixed costs plus total variable costs.