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Exam 5: Cost-Volume-Profit Relationships

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Question 41

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Mechem Corporation produces and sells a single product. In April, the company sold 2,100 units. Its total sales were $205,800, its total variable expenses were $107,100, and its total fixed expenses were $82,400.Required: a. Construct the company's contribution format income statement for April.b. Redo the company's contribution format income statement assuming that the company sells 2,200 units.

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Question 42

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Deidoro Company has provided the following data for maintenance cost: Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable components of maintenance cost are closest to: (Round your intermediate calculations to 2 decimal places.)

A) $26,600 per year; $3.10 per machine hour
B) $9,000 per year; $2.20 per machine hour
C) $9,000 per year; $3.10 per machine hour
D) $26,600 per year; $2.20 per machine hour

E) None of the above
F) A) and B)

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Question 43

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Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

Sattler Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. What is the contribution margin per unit? b. What is the variable expense ratio? c. If sales decline to 7,900 units, what would be the estimated net operating income? d. If the variable cost per unit increases by $5, spending on advertising increases by $2,000, and unit sales increase by 3,400 units, what would be the estimated net operating income? e. What is the break-even point in dollar sales? f. Estimate how many units must be sold to achieve a target profit of $50,400. g. What is the margin of safety percentage? h. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 15% increase in sales volume?

Inspection costs at one of Ratulowski Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced.Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to: (Round your intermediate calculations to 2 decimal places.)

Caraco Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 12,400 units is closest to: (Round your intermediate calculations to 2 decimal places.)

Jorgenson Corporation has provided the following data for the first five months of the year: Using the high-low method of analysis, the estimated monthly fixed component of lubrication cost is closest to: (Round your intermediate calculations to 2 decimal places.)

Sufra Corporation is planning to sell 100,000 units for $8.00 per unit and will break even at this level of sales. Fixed expenses will be $300,000. What are the company's variable expenses per unit?

Data concerning Kardas Corporation's single product appear below: The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

In a Cost-Volume-Profit graph, the anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line (sales) and the total fixed expense line.

Data concerning Bazin Corporation's single product appear below: Fixed expenses are $384,000 per month. The company is currently selling 6,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $46,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change?

Wuensch Incorporated, an escrow agent, has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed. Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction.Using the high-low method, the estimate of the variable component of office expense per escrow completed is closest to:

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

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. If the company sells 7,700 units, its net operating income should be closest to: (Do not round intermediate calculations.)

The margin of safety is the amount by which sales can decrease before losses are incurred by the company.

To estimate what the profit will be at various levels of sales volume, multiply the number of units to be sold above or below the break-even point by the unit contribution margin.

Warbler Gift's reported the following information for the sales of their single product: Warbler's salesmen have proposed to decrease the selling price by 50 cents per unit. How many units will need to be sold for Warbler to earn at least the same net operating income? (Round your intermediate calculations to 2 decimal places.)

Break-even analysis assumes that:

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

Andom Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total monthly fixed manufacturing cost is: (Round your intermediate calculations to 2 decimal places.)