Question

1.

MJH company had the following data: 1.) Sales $2160000 2.) cost of goods sold $1123200 3.) selling expense-$180000 4.) Administrative expense_$144,000. On a piece of scrap paper do an absorption costing income statement . What is gross profit?

		$324,000
		$712,800
		$1036800
		$576,000

2.

John sold $500,000 worth of merchandise , His variable costs are $300,000. What is the contribution margin

		$500,000
		$200,000
		$300,000
		cannot be determined

3.

Which would you find on a variable costing income statement?

		total general and administrative expenses
		gross profit
		Contribution margin
		total operating expenses

4.

ABC sells its shirts for $50 a piece. If fixed costs are $300,000 and variable costs are $30 per unit, what is break-even in units?

		60,000
		3750
		15000
		10,000

5.

if fixed costs increased

		break-even would remain the same
		break-even would decrease
		variable costs would also increase
		break-even would increase

Answer 1

1.

Sales = $2160000

Cost of goods sold = $1123200

Gross profit = Sales - Cost of goods sold

= 2160000 - 1123200

= $1036800

Third option is correct.

2.

Sales = $500,000

Variable costs = $300,000

Contribution margin = Sales - Variable costs

= 500,000 - 300,000

= $200,000

Second option is correct.

3.

Contribution margin is found on a variable costing income statement.

Third option is correct.

Gross profit is found on a absorption costing income statement.

4.

Selling price per unit = $50

Variable cost per unit = $30

Fixed cost = $300,000

Contribution margin per unit = Selling price per unit – Variable cost per unit

= 50 - 30

= $20

Break even point (units) = Fixed cost/Contribution margin per unit

= 300,000/20

= 15,000

Third option is correct.

5.

If fixed costs increase, break-even would increase.

Fourth option is correct.

If fixed costs decrease, break-even would decrease.