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Free CMA Exam Braindumps (page: 79)

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PDF with 1336 Questions
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Which of the following is a characteristic of a contribution income statement?

  1. Fixed and variable expenses are combined as one line.
  2. Fixed expenses are listed separately from variable expenses.
  3. Fixed and variable manufacturing costs are combined as one-line item, but fixed operating expenses are shown separately from variable operating expenses.
  4. Fixed and variable operating expenses are combined as one-line item, but fixed manufacturing expenses are shown separately from variable manufacturing expenses.

Answer(s): B

Explanation:

The contribution income statement emphasizes the distinction between fixed and variable costs. Making this distinction facilitates determination of CVP relationships and the effects of changes in sales volume on income. Thus, fixed manufacturing costs and other fixed costs are separated from variable manufacturing costs and other variable costs. The basic categories in the contribution income statement are variable costs, contribution margin, fixed costs, and operating income.



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The breakeven point in units increases when unit costs

  1. Increase and sales price remains unchanged.
  2. Decrease and sales price remains unchanged.
  3. Remain unchanged and sales price increases.
  4. Decrease and sales price increases.

Answer(s): A

Explanation:

The breakeven point in units is calculated by dividing the fixed costs by the contribution margin per unit. If selling price is constant and costs increase, the unit contribution margin will decline, resulting in an increase of the breakeven point.



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For a profitable company, the amount by which sales can decline before losses occur is known as the

  1. Sales volume variance.
  2. Hurdle rate.
  3. Variable sales ratio.
  4. Margin of safety.

Answer(s): D

Explanation:

The margin of safely measures the amount by which sales may decline before losses occur. It equals budgeted or actual sales minus sales at the BEP. It may be stated in either units sold or sales revenue.



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Which one of the following is true regarding a relevant range?

  1. Total variable costs will not change.
  2. Total fixed costs will not change.
  3. Actual fixed costs usually fall outside the relevant range.
  4. The relevant range cannot be changed after being established.

Answer(s): B

Explanation:

The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost.






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