Select the correct answer for each of the following statements.

(a) An accountant would typically have the following in mind when referring to the margin of safety: (1) the excess of budgeted or actual sales revenue over the fixed costs; (2) the excess of actual sales over budgeted sales; (3) the excess of sales revenue over the variable costs; (4) the excess of a selected sales figure over break-even sales; (5) none of the above.

(b) The alternative that would decrease the contribution margin per unit the most is a 15% (1) decrease in selling price; (2) increase in variable expenses; (3) increase in selling price; (4) decrease in variable expenses; (5) decrease in fixed expenses.

(c) If fixed costs decrease while variable costs per unit remain constant, the new contribution margin in relation to the old contribution margin will be (1) unchanged; (2) higher; (3) lower; (4) indeterminate; (5) none of the above.

(d) Cost-volume-profit relationships which are curvilinear may be analyzed linearly by considering only (1) a relevant range of activity; (2) relevant fixed costs; (3) relevant variable costs; (4) fixed and semivariable costs.

(e) Cost-volume-profit analysis is most important for the determination of the (1) volume of operation necessary to break even; (2) relationship between revenues and costs at various levels of operations; (3) variable revenues necessary to equal fixed costs; (4) sales revenue necessary to equal variable costs.

(f) In 19A the contribution margin ratio of the Wayne Company was 30%.

In 19B fixed costs are expected to be $120,000-as in 19A. Sales are forecast at $550,000 - a 10% increase over 19A. To increase net in-come by $15,000 in 19B, the contribution margin ratio must be (1) 20%; (2) 30%; (3) 40%; (4) 70%.

(g) The major assumption as to cost and revenue behavior underlying conventional cost-volume-profit calculations is the (1) constancy of fixed costs; (2) variability of unit prices and efficiency; (3) curvilinearity of relationships; (4) linearity of relationships.

(h) The cost-volume-profit analysis underlying the conventional break-even chart does not assume that (I) sales prices per unit will remain fixed; (2) total fixed costs remain the same; (3) some costs vary inversely with activity; (4) costs are linear and continuous over the relevant range.

(NAA and AICPA adapted)