Accounting Contribution Margin Worksheet

Q1. Non-routine Operating Decisions include all the following excepta. Budgeting decisions.
b. Outsource and insource decisions.
c. Special order decisions.
d. Allocation of Constrained resources decisions.
q2. Which of the following is correct regarding Relevant fixed costs
a. They are allocated fixed costs.
b. They unavoidable fixed costs
c. They are all avoidable fixed costs.
d. They are traced fixed costs
q3. A tender has been received by a company to get a component from external
supplier for 25 SR per unit that is being made inside the company with the following
cost information per unit
•
o
o
o
o
o
o
Direct material SR 5
Direct labor SR 7
Variable manufacturing overhead SR 7
Fixed manufacturing overhead allocated SR 8
Selling and administrative expenses SR 5
Traced and avoidable Fixed manufacturing overhead SR 8
What is the relevant cost and whether to insource or outsource.
a. Relevant cost is 10 and the decision is to insource.
b. Relevant cost is 32 and the decision is to outsource.
c. Relevant cost is 40 and the decision is to outsource.
d. Relevant cost is 27 and the decision is to outsource.
q4. A manufacturing company is considering whether to drop or keep the product X
because it realized net operating losses of 50,000 SR. The income statement for the
product as follows:
•
•
•
•
•
•
Net sales 200,000
Variable costs 125,000
Contribution margin 75,000
Allocated fixed costs 75,000
Traced and avoidable fixed costs 50,000
Net operating loss 50,000
What is the right decision?
a. Keep because the contribution margin is less than relevant fixed costs.
b. Keep because the contribution margin is greater than relevant fixed costs.
c. Drop because the contribution margin is greater than relevant fixed costs.
d. Drop to avoid net operating loss of 50,000
q5. A special order has been received by a company to purchase 5,000 units for 25 SR
per unit that is being sold to regular customers for 35 SR. Cost details per unit as
follows:
•
•
•
•
•
•
Direct material SR 5
Direct labor SR 7
Variable manufacturing overhead SR 7
Fixed manufacturing overhead allocated SR 8
Selling and administrative expenses SR 5
Traced and avoidable Fixed manufacturing overhead SR 8
What is the right decision?
a. Relevant cost is 40 and the decision is to outsource.
b. Relevant cost is 32 and the decision is to outsource.
c. Relevant cost is 10 and the decision is to in source.
d. Relevant cost is 27 and the decision is to outsource.
q6. the general rule to drop the product with net operating losses is
a. Sales equal cost of goods sold.
b. Relevant Fixed Costs – Relevant variable Costs + Opportunity cost < contribution margin c. Contribution = Relevant Fixed Costs + Relevant variable Costs + Opportunity cost. d. Contribution margin < Relevant Fixed Costs + Relevant variable Costs + Opportunity cost q7. The cost to in source is a. Relevant variable cost+ irrelevant fixed cost- opportunity cost. b. Relevant variable cost+ relevant fixed cost- opportunity cost. c. Relevant variable cost+ relevant fixed cost+ opportunity cost. d. Relevant fixed cost - relevant variable cost+ opportunity cost. q8. Below is the information about product X , Y Particular X Y Total Contribution margin per unit 50 70 Labor hour per unit 2 4 Labor hours available 120,000 Assuming Labor hours available are constrained and the demand for the products are unlimited. What is the mix of sales that maximize the contribution margin for the company? a. 40,000 units from product X and 10,000 units from Y. b. 10, 000 units from product Y c. 60,000 units from product X d. 30,000 units from product Y q9. Below is the information about product X , Y Particular X Y Total Contribution margin per unit 50 70 Labor hour per unit 2 4 Labor hours available 120,000 Assuming Labor hours available are constrained and the demand for the products X limited as a maximum of 40,000 units. What is the mix of sales that maximize the contribution margin for the company? a. 40,000 units from product X and 10,000 units from Y. b. 30,000 units from product Y c. 60,000 units from product X d. 10,000 units from product X and 40,000 units from Y. q10. Which of the following is correct In case of accepting special order at the expense of sales to regular customers. a. Relevant costs will be calculated without the income lost due to decline in contribution margin on regular sales. b. Oportunity cost should be deducted from relevant costs. c. Oportunity cost should be added to relevant costs to be covered by the price for the special order. d. No effects on profit.