1. A company has total fixed costs of $180,000 and a contribution margin ratio of 30%. How much sales are

1.  A company has total fixed costs of $180,000 and a contribution margin ratio of 30%. How much sales are necessary to break even? 

        $540,000

        $600,000     

        $54,000

        $126,000 

2.  How much sales are required to earn a target income of $80,000, if total fixed costs are $100,000 and the contribution margin ratio is 40%? 

        $300,000

        $200,000

        $450,000     

        $330,000 

3.  Which one of the following is correct concerning a budget? 

        It can act as a substitute for management.

        It is a written statement of management’s plans for a specified future time period.

        It is required for all business operations.

        It is used only by manufacturing companies.

4.  Which one of the following would most likely cause an unrealistic budget to result? 

        All levels of management contributed to its development.

        The budget has been developed in a participative approach.

        The budget has been developed in a top down fashion.

        The budget was developed after considerable planning.

5.  What three differences exist between long-range planning and budgeting? 

        Amount of detail, content, and emphasis

        Time periods involved, amount of detail, and content

        Content, emphasis, and amount of detail

        Emphasis, time periods involved, and amount of detail

6.  Which of the following statements about a budgeted income statement is true? 

        It is prepared before the operating budgets are prepared.

        It reflects the cash to be received and paid as a result of operations.

        It is prepared after the cash budget is prepared.

        It is prepared using the individual operating budgets.

7.  Which one of the following is true concerning a static budget? 

        It is prepared at the end of the accounting period once actual results are known.

        It is useful in evaluating a manager’s performance by comparing variable costs and planned variable costs.

        It shows planned results at the original budgeted activity level.

        It reflects the level of activity at which the company will be most profitable.

8.   Which type of center is the housekeeping department of a manufacturing company? 

        A segment

        A profit center

        A cost center

        An investment center

9.  For which of the following is an investment center manager responsible? 

        Invested assets, sales, and costs

        Sales, profits, and invested assets

        Sales, invested assets, and assets

        Revenues and costs

10.  An investment center generated a contribution margin of $200,000, controllable fixed costs of $100,000 and sales of $1,000,000. The center’s average operating assets were $400,000. How much is the return on investment? 

        25%    

        175%

        50%

        75%