Multiple Choice The relationship between a company\'s contribution margin and in
ID: 2565717 • Letter: M
Question
Multiple Choice The relationship between a company's contribution margin and income from operations is measured by the contribution margin ratio the margin of safety the breakeven point operating leverage If fixed costs remain the same, the breakeven point increases if the selling price per unit remains the same and the variable cost per unit decreases. the selling price per unit increases and variable cost per unit remains the same. the number of units sold increase. the selling price per unit decreases and variable cost per unit remains the same. Which is better, or preferable, change over time? An increase in the number of days' in receivables A decrease in the margin of safety An increase on the rate earned on total assets An increase in the breakeven point Which of the following is considered a fixed cost? Salesperson's salary of $22,000 plus 2% of total sales Brass buttons for a clothing manufacturer that cost $.55 per unit Electricity costs with a flat monthly charge of $195 plus $.011 per kilowatt-hour Rent on plant equipment, $40,000 per month When the number of units manufactured is greater than the number of units sold income from operations under variable costing with be less than income from operations under absorption costing income from operations under variable costing with be more than income from operations under absorption costing income from operations under variable costing with equal to income from operations under absorption costing income from operations under variable costing cannot be determined.Explanation / Answer
Operating leverage = Contribution margin / Operating income.
The answer is Operating leverage.
----------
Breakeven point = Fixed costs / Contribution margin per unit
Breakeven point increases if the contribution margin per unit decreases which can be caused by the decrease in the selling price.
The answer is the selling price per unit decreases and the variable cost per unit remains the same
----------
Rate earned on total assets which is Return on Assets is an indicator of the management using its asstes effeciently to generate revenues. The increase in Return on Assets is a good indicator of the company's performance
The answer is An increase on the rate earned on total assets.
----------
Rent is a fixed cost which remains fixed every month untill the decision has been made to change
The answer is Rent on plant equipment, $40,000 per month
----------
If more units are produced than sold, absorption costing will have higher net income because costs are all sitting in inventory, whereas variable costing will have lower net income because not as many costs end up in inventory compared to cost of goods sold.
The answer is Income from operations under variable costing with be less than income from operations under absorption costing.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.