Multiple Choice: #1 Which of the following statements is true of the behavior of

ID: 2535224 • Letter: M

Question

Multiple Choice:

#1 Which of the following statements is true of the behavior of total variable costs, within the relevant range?

a) they will decrease as production increases

b) they will decrease as production decreases

c) they will increase as production decreases

d) they will remain the same as production levels change

#2 The dollar amount that provides for covering fixed costs and then provides for operating income is called ______.

a) variable cost

b) contribution margin

c) margin of safety

d) total cost

#3 Johar Company provides the following information about its product:

$65,000

$12.00

$1.80

$130,000

What is the contribution margin ratio?

a) 85% b) 118% c) 100% d) 15%

Targeted operating income

$65,000

Selling price per unit

$12.00

Variable cost per unit

$1.80

Total Fixed Costs

$130,000

1. b) they will decrease as production decreases.

2. b) contribution margin

3. a) 85%

Contribution margin ratio = ($12 - $1.80) / $12 = 85%

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