Total contribution margin less total fixed expenses equals |
operating income. |

The unit contribution margin is computed by |
subtracting the variable cost per unit from the sales price per unit. |

The contribution margin ratio explains the percentage of each sales dollar that |
contributes toward fixed costs and generating a profit. |

CVP analysis assumes all of the following except |
inventory levels will increase. |

To the left of the breakeven point on a CVP graph, the area between the total expense line and the sales revenue line represents which of the following? |
Operating loss |

To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is |
(fixed expenses + operating income) / contribution margin per unit |

To find the sales revenue (sales in dollars) needed in order to breakeven or generate a target profit, the formula used is |
(fixed expenses + operating income) / contribution margin ratio |

To find the sales revenue need to breakeven, the formula used could be |
fixed expenses / contribution margin ratio |

To find the number of units that need to be sold to breakeven, the formula used could be |
fixed expenses / contribution margin per unit |

The breakeven point may be defined as the number of units a company must sell to do which of the following? |
Generate a zero profit |

Sales above the breakeven point indicate a ______, whereas sales below the breakeven point indicate a ______. |
profit; loss |

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents |
total fixed costs. |

Company A has a higher safety of margin while Company B has a lower safety of margin. Company a would be considered _______ Company when considering only margin of safety. |
less risky than |

A company’s margin of safety can be stated |
any of the above (in dollars, as a percentage of sales, in units) |

A company’s margin of safety is computed as |
expected sales – sales at breakeven. |

All else being equal, a company with high operating leverage will have |
relatively high contribution margin ratio. |

All else being equal, a company with a low operating leverage will have |
relatively high variable costs. |

To find a firm’s operating leverage factor at a given level of sales, you |
divide the contribution margin by operating income. |

By multiplying the operating leverage by the anticipated percentage change in volume, one can find |
the anticipated change in operating income. |

The higher the operating leverage factor, the |
greater the impact of volume on operating income. |

# Managerial Accounting Ch. 7 Pre-Quizzes

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