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Variable Costs Quiz

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This week's quiz brought to you by:
Barbara W. Scofield, PhD, CPA - Associate Professor of Accounting
and Director of the Financial Accounting Concentration
University of Dallas
Irving, Texas



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1 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. How many must ABC Company sell to breakeven?
120
80
60
40

2 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. The sales manager expects sales of 1000 units of Product A. What is the expected contribution margin on Product A?
$4,880.00
$3,000.00
$2,880.00
$1,880.00

3 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. What is the expected contribution to operating profit of Product A?
$4,880.00
$3,000.00
$2,880.00
$1,880.00

4 - Product A has a variable cost of $2. ABC Company will incurr $120 of fixed costs to produce Product A. The sales manager expects to sell 1000 units of Product A. What is the minimum amount will the company need to charge its customers for Product A in order to breakeven?
$3.12
$3.00
$2.12
$2.00

5 - Product A has a variable cost of $2. ABC Company will incurr $120 of fixed costs to produce Product A. The sales manager expects to sell 1000 units of Product A. What is the minimum amount the company will need to charge its customers for Product A in order to earn $1,000?
$3.12
$3.00
$2.12
$2.00

6 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. The market price is highly competitive and ABC Company expects it will have to decrease its current price to customers to $4.40 this next year in order to maintain its sales of 1,000 units of Product A. How many additional units will it need to sell to maintain the same contribution to operating income from this product? :
300
250
160
120

7 - Product A has a variable cost of $2 and a current price of $5. ABC Company incurs $120 of fixed costs to produce Product A at its current production rate. In order to expand production to meet expected sales of 2,000 units, the company can either increase its fixed costs from $120 to $240 or increase its variable cost to $2.60 on each unit. How much profit can ABC Company expect from selecting the preferred strategy? :
$5,880.00
$5,760.00
$4,680.00
$4,560.00

8 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. The company is currently selling 1,000 units of Product A. ABC Company expects that if it cut the price to $4 it would be able to sell twice as many units of Product A. What is the change in profit if ABC Company cuts its price to $4 and expands its sales volume to 2,000 units?
$1000 increase
$1000 decrease
$2000 increase
$2000 decrease

9 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. The company is currently selling 1,000 units of Product A. ABC Company expects that if it raises the price to $6 it would still sell 70% of the units it is currently selling. What is the change in profit if ABC Company increases the price charged to $6 and sells 300 fewer units?
$200 increase
$200 decrease
$400 increase
$400 decrease

10 - Product A has a variable cost of $2 and a current price of $5. ABC Company will incurr $120 of fixed costs to produce Product A. The company is currently selling 1,000 units of Product A. ABC Company expects that if it lowers its costs to $1.50, the company would still be able to place 90% of the product that it is currently selling. What is the change in profit if ABC Company decreases the variable cost of the product to $1.50 sells 100 fewer units?
$100 increase
$100 decrease
$150 increase
$150 decrease

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