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Exam 2: Costvolumeprofit Relationships

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Question 121

Multiple Choice

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A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is:

A) $32,000
B) $96,000
C) $128,000
D) $192,000

E) A) and B)
F) B) and C)

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Question 122

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Nocum Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If sales decline to 2,900 units, the net operating income would be closest to:

A) $29,000
B) $1,000
C) $8,700
D) $8,000

E) A) and B)
F) B) and C)

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Question 123

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The margin of safety percentage is equal to the margin of safety in dollars divided by total contribution margin.

Sebree Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The degree of operating leverage is closest to:

Data concerning Pellegren Corporation's single product appear below: Fixed expenses are $531,000 per month. The company is currently selling 4,000 units per month. The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change?

Junior Bodway, Inc., has provided the following budgeted data: What is the company's break-even point in sales dollars?

Data concerning Strite Corporation's single product appear below: Assume the company's target profit is $8,000. The dollar sales to attain that target profit is closest to: (Round your intermediate calculations to 2 decimal places.)

A tile manufacturer has supplied the following data: If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net operating income should be closest to: (Round your intermediate calculations to 2 decimal places.)

Stonebraker Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. If sales increase to 9,040 units, what would be the estimated increase in net operating income? b. If the variable cost per unit increases by $6, spending on advertising increases by $3,000, and unit sales increase by 19,200 units, what would be the estimated net operating income? c. Estimate how many units must be sold to achieve a target profit of $26,100.

Product Y sells for $15 per unit, and has variable expenses of $9 per unit. Fixed expenses total $300,000 per year. How many units of Product Y must be sold each year to yield an annual profit of $90,000?

A decrease in the number of units sold will decrease the break-even point.

Which of the following would not affect the break-even point?

A company that makes organic fertilizer has supplied the following data: The company's degree of operating leverage is closest to:

Escareno Corporation has provided its contribution format income statement for June. The company produces and sells a single product. If the company sells 8,200 units, its total contribution margin should be closest to:

The management of Merklin Corporation expects sales in May to be $105,000. The company's contribution margin ratio is 70% and its fixed monthly expenses are $48,000. Required: Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change. Show your work!

Naumann Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $234,000 per month. The company is currently selling 4,000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Serfass Corporation's contribution format income statement for July appears below: The degree of operating leverage is closest to:

Hamernik, Inc., produces and sells a single product whose selling price is $240.00 per unit and whose variable expense is $72.00 per unit. The company's fixed expense is $372,960 per month. Required: Determine the monthly break-even in either unit or total dollar sales. Show your work!

A manufacturer of tiling grout has supplied the following data: The company's degree of operating leverage is closest to:

Goodman Corporation has sales of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed costs are $66,000, the degree of operating leverage is: