Management Accounting - Study Mode
[#271] The margin of safety may be defined as
Correct Answer
(D) the difference between planned sales and break-even point sales
[#272] Gross margin is added to cost of sold goods to calculate
Correct Answer
(A) revenues
Explanation
Solution: Gross margin is added to cost of sold goods to calculate revenues. Revenue is the income generated from normal business operations and includes discounts and deductions for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine net income.
[#273] Type of distribution, which describes whether events to be occurred are mutually exclusive or collectively exhaustive can be classified as
Correct Answer
(B) probability distribution
Explanation
Solution: Type of distribution, which describes whether events to be occurred are mutually exclusive or collectively exhaustive can be classified as probability distribution. A probability distribution is a list of all of the possible outcomes of a random variable along with their corresponding probability values. To give a concrete example, here is the probability distribution of a fair 6-sided die.
[#274] Fixed cost is divided by break-even revenues to calculate
Correct Answer
(D) contribution margin
Explanation
Solution: Fixed cost is divided by break-even revenues to calculate contribution margin. Contribution margin is a product's price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. The total contribution margin generated by an entity represents the total earnings available to pay for fixed expenses and to generate a profit.
[#275] If gross margin is $2000 and revenue is $5000, then cost of goods sold would be
Correct Answer
(B) $3,000
Explanation
Solution: Cost of goods sold = Revenue - Gross margin = $5000 - $2000 = $3,000.