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Exam 2: Costvolumeprofit Relationships

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Question 61

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Corporation X sold 25,000 units of product last year. The contribution margin per unit was $2, and fixed expenses totaled $40,000 for the year. This year fixed expenses are expected to increase to $45,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same net operating income as was earned last year?

A) 22,500
B) 27,500
C) 35,000
D) 2,500

E) A) and C)
F) All of the above

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Question 62

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Thornbrough Corporation produces and sells a single product with the following characteristics: The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. The marketing manager believes that a $28,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

A) decrease of $28,000
B) increase of $33,440
C) increase of $5,440
D) decrease of $5,440

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

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Question 63

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Brancati Inc. produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $32,860. Required: a. Determine the overall break-even point for the company in total sales dollars. Show your work! b. If the sales mix shifts toward Product W07C with no change in total sales, what will happen to the break-even point for the company? Explain.

In a CVP graph (sometimes called a break-even chart), unit volume is represented on the horizontal (X) axis and dollars on the vertical (Y) axis.

Data concerning Strite Corporation's single product appear below: Assume the company's target profit is $17,000. The unit sales to attain that target profit is closest to:

Cubie Corporation has provided the following data concerning its only product: What is the margin of safety in dollars?

The February contribution format income statement of Mcabier Corporation appears below: The degree of operating leverage is closest to:

Thornbrough Corporation produces and sells a single product with the following characteristics: The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. The marketing manager would like to cut the selling price by $18 and increase the advertising budget by $53,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,000 units. What should be the overall effect on the company's monthly net operating income of this change?

Gamma Corporation has sales of $120,000, a contribution margin of $48,000, and a net operating income of $12,000. The company's degree of operating leverage is:

Wenstrom Corporation produces and sells a single product. Data concerning that product appear below: The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

The break-even point can be determined by simply adding together all of the expenses from the income statement.

If the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio will increase.

Ingrum Corporation produces and sells two products. In the most recent month, Product R38T had sales of $20,000 and variable expenses of $7,400. Product X08S had sales of $39,000 and variable expenses of $6,170. The fixed expenses of the entire company were $41,160. The break-even point for the entire company is closest to:

Wimpy Inc. produces and sells a single product. The selling price of the product is $150.00 per unit and its variable cost is $58.50 per unit. The fixed expense is $366,915 per month. The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

A manufacturer of cedar shingles has supplied the following data: The company's contribution margin ratio is closest to:

Zanetti Corporation produces and sells a single product. Data concerning that product appear below: The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

Shambo Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Using the degree of operating leverage, the estimated percent increase in net operating income as the result of a 20% increase in sales is closest to: (Round your intermediate calculations to 1 decimal place.)

Roddam Corporation produces and sells two products. Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $41,970. If the sales mix were to shift toward Product K09E with total dollar sales remaining constant, the overall break-even point for the entire company:

A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase.

Variable expenses for Alpha Corporation are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year: