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Exam 2: Costvolumeprofit Relationships

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Question 101

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Awtis Corporation has a margin of safety percentage of 20% based on its actual sales. The break-even point is $500,000 and the variable expenses are 60% of sales. Given this information, the actual profit is:

A) $65,000
B) $55,000
C) $50,000
D) $41,500

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

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Question 102

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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. If the sales mix were to shift toward Product R38T with total sales remaining constant, the overall break-even point for the entire company:

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

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

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Question 103

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A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will:

Creswell Corporation's fixed monthly expenses are $29,000 and its contribution margin ratio is 56%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $95,000?

Bendel Inc. has an operating leverage of 7.3. If the company's sales increase by 3%, its net operating income should increase by about:

Coultrap Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The contribution margin per unit is closest to:

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.)

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:

Dickus Corporation's only product sells for $100 per unit. Its current sales are 35,600 units and its break-even sales are 29,192 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

Data concerning Dorazio Corporation's single product appear below: Fixed expenses are $87,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $28. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

A company that makes organic fertilizer has supplied the following data: The company's unit contribution margin is closest to: (Round your intermediate calculations to 2 decimal places.)

Nussbaum Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The number of units that must be sold to achieve a target profit of $16,100 is closest to:

The contribution margin ratio of Mountain Corporation's only product is 52%. The company's monthly fixed expense is $296,400 and the company's monthly target profit is $7,000. The dollar sales to attain that target profit is closest to:

Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January. If the company sells 4,600 units, its total contribution margin should be closest to:

Houpe Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $490,000 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 $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $58,000 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 100 units. What should be the overall effect on the company's monthly net operating income of this change?

Golebiewski Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The margin of safety in dollars is closest to:

A manufacturer of premium wire strippers has supplied the following data: The company's unit contribution margin is closest to:

A cement manufacturer has supplied the following data: If the company increases its unit sales volume by 4% without increasing its fixed expenses, then total net operating income should be closest to: (Round your intermediate calculations to 2 decimal places.)

Langin Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. What is the margin of safety percentage? b. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 15% increase in sales?

Kelsay Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The contribution margin ratio is closest to: