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Exam 5: Cost-Volume-Profit Relationships

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Question 1

Multiple Choice

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Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $42,550. -If the sales mix were to shift toward Product B32L with total sales remaining constant,the overall break-even point for the entire company:

A) could increase or decrease.
B) would decrease.
C) would not change.
D) would increase.

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

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Question 2

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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) 50,000 units
B) 65,000 units
C) 15,000 units
D) 43,333 units

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

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Question 3

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Tropp Corporation sells a product for $10 per unit.The fixed expenses are $420,000 per month and the unit variable expenses are 60% of the selling price.What sales would be necessary in order for Tropp to realize a profit of 10% of sales?

Sannella Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $991,000 per month.The company is currently selling 8,000 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 $11 per unit.In exchange,the sales staff would accept a decrease in their salaries of $74,000 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 200 units.What should be the overall effect on the company's monthly net operating income of this change?

Sebree Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. -Using the degree of operating leverage,the estimated percent increase in net operating income as the result of a 5% increase in sales is closest to:

A company with high operating leverage will experience a larger reduction in net operating income in a period of declining sales than a company with low operating leverage.

Flesch Corporation produces and sells two products.In the most recent month,Product C90B had sales of $24,000 and variable expenses of $6,480.Product Y45E had sales of $29,000 and variable expenses of $11,010.The fixed expenses of the entire company were $32,280.If the sales mix were to shift toward Product C90B with total dollar sales remaining constant,the overall break-even point for the entire company:

Maziarz Corporation produces and sells a single product. Data concerning that product appear below: -Assume the company's target profit is $11,000.The unit sales to attain that target profit is closest to:

Shambo Corporation has provided the following contribution format income statement. All questions concern situations that are 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:

Lister Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. -If sales increase to 3,040 units,the increase in net operating income would be closest to:

In a CVP 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.

Cassius Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. The number of units that must be sold to achieve a target profit of $31,500 is closest to:

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!

Borich Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly unit sales is closest to:

Bear Publishing sells a nature guide.The following information was reported for a typical month: What is Bear's current break-even point in unit and dollars?

Which of the following is correct? The break-even point occurs on the CVP graph where:

Logsdon Corporation produces and sells a single product whose contribution margin ratio is 63%.The company's monthly fixed expense is $720,720 and the company's monthly target profit is $28,000.The dollar sales to attain that target profit is closest to:

Black Corporation's sales are $600,000,its fixed expenses are $150,000,and its variable expenses are 60% of sales.The margin of safety is:

Evan's Electronics Boutique sells a digital camera.The following information was reported for the digital camera last month: Evan's margin of safety in dollars and percentage are closest to:

Ensley Corporation has provided the following data concerning its only product: The margin of safety as a percentage of sales is closest to: