Which of the Following Formulae Is Correct When Using the Contribution

question 133

Multiple Choice

Which of the following formulae is correct when using the contribution margin method to determine the break-even point?

• A)Revenues less operating income equal variable costs plus fixed costs.
• B)Unit contribution margin times unit variable cost equals the break-even number of units.
• C)Unit contribution margin times the break-even number of units equals total variable costs.
• D)Selling price less unit contribution margin equals unit fixed cost for all values below or at the break-even number of units.
• E)Unit contribution margin times the break-even number of units equals fixed costs.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, such as salaries of managers and depreciation of factory equipment.

Deferred

A term indicating that something has been postponed or delayed, often referring to income, taxes, or expenses.

Inventories

Assets held for sale in the ordinary course of business, or materials that will be used in the production of goods to be sold.

Year 2

Typically refers to the second year of a company's operations or performance being analyzed.