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BA213 Review for test # 2 Key

  • 1.

    Contribution margin can be defined as:

    • a.

      the amount of sales revenue necessary to cover variable expenses.

    • b.

      sales revenue minus fixed expenses.

    • c.

      the amount of sales revenue necessary to cover fixed and variable expenses.

    • D.

      sales revenue minus variable expenses.

  • 2.

    If both the fixed and variable expenses associated with a product decrease, what will be the effect on the

contribution margin ratio and the break-even point, respectively?

a. B. c. d.

  • 3.

    The margin of safety can be calculated by:

    • A.

      Sales - (Fixed expenses/Contribution margin ratio).

    • b.

      Sales - (Fixed expenses/Variable expense per unit).

    • c.

      Sales - (Fixed expenses + Variable expenses).

    • d.

      Sales - Net operating income.

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