# Contribution margin

Accounting Questions

1. Contribution margin can be defined as: (Points : 2)
the amount of sales revenue necessary to cover variable expenses.
sales revenue minus fixed expenses.
the amount of sales revenue necessary to cover fixed and variable expenses.
sales revenue minus variable expenses.

2. If a company is operating at the break-even point: (Points : 2)
its contribution margin will be equal to its variable expenses.
its margin of safety will be equal to zero.
its fixed expenses will be equal to its variable expenses.
its selling price will be equal to its variable expense per unit.

3. Break-even analysis assumes that: (Points : 2)
Total revenue is constant.
Unit variable expense is constant.
Unit fixed expense is constant.
Selling prices must fall in order to generate more revenue.

4. A company makes a single product that it sells for \$16 per unit. Fixed costs are \$76,800 per month and the product has a contribution margin ratio of 40%. If the company’s actual sales are \$224,000, its margin of safety is: (Points : 2)
\$32,000
\$96,000
\$128,000
\$192,000

5. Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January.
If the company sells 4,600 units, its total contribution margin should be closest to: (Points : 2)
\$54,600
\$59,800
\$69,400
\$13,362

6. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November.
If the company sells 5,300 units, its net operating income should be closest to: (Points : 2)
\$24,600

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