Reference no: EM132711010

A company must decide which of the following four products to manufacture:

Product           Sales price         Variable Cost        Direct Labor Hrs Per Unit

M                     $10                      $7                       1.5

N                        20                    12                        2

O                     5                             2                   0.5

P                      8                            4                     1.0

Problem 1: Which product will result in the highest contribution margin per hour?

a) M

b) N

c) O

d) P

Problem 2: Which of the following is a characteristic of a contribution income statement?

a) Fixed and variable expenses are combined as one line

b) Fixed expenses are listed separately from variable expenses

c) Fixed and variable manufacturing cost are combined as one -line item, but fixed operating expenses are shown separately from variable operating expenses

d) Fixed and variable operating expenses are combined as one line item, but fixed manufacturing expenses are shown separately from variable manufacturing expenses

Problem 3: Which of the following statements best describes variable costing?

a) Costs that vary in total and on a per unit basis

b) Costs that remain fixed in total but vary on a per unit basis

c) Costs that vary in total but are constant on a per unit basis

d) Costs that remain constant in total and on a per unit basis