Finance for Non-Finance Managers Budgeting and Variance Analysis 3

Question 1

What is contribution margin?

Accepted Answer

Revenue minus variable costs

Answer

Total revenue minus total costs

Answer

Gross profit minus operating expenses

Answer

Net income plus depreciation

Question 2

Break-even point is the level of sales at which:

Accepted Answer

Total revenue equals total costs, resulting in zero profit

Answer

Profit equals 10% of revenue

Answer

Variable costs equal fixed costs

Answer

Cash flow is maximized

Question 3

If fixed costs are $60,000 and contribution margin per unit is $20, what is the break-even quantity?

Accepted Answer

3,000 units

Answer

1,200 units

Answer

6,000 units

Answer

12,000 units

Question 4

Sensitivity analysis in budgeting is used to:

Accepted Answer

Assess how budget outcomes change when key assumptions vary

Answer

Record all historical cost changes

Answer

Set the minimum acceptable profit margin

Answer

Allocate overhead costs to departments

Question 5

Overhead absorption rate is used to:

Accepted Answer

Allocate indirect (overhead) costs to products or cost centers

Answer

Calculate the direct cost per unit of output

Answer

Determine the selling price of a product

Answer

Measure customer profitability

Question 6

Which of the following is the BEST use of budget variance reports?

Accepted Answer

To identify deviations from plan and drive corrective action

Answer

To assign blame to department managers

Answer

To replace the need for financial statements

Answer

To communicate results to shareholders only