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Exam 6: Cost-Volume-Profit Relationship

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Question 21

Multiple Choice

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A manufacturer of tiling grout has supplied the following data: -The company's break-even in unit sales is closest to:

A) 272,308
B) 98,333
C) 92,055
D) 60,488

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

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Question 22

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On a cost-volume-profit graph, the revenue line will be shown above the total expense line for any activity level above the break-even point.

A) True
B) False

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Question 23

Multiple Choice

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

Data concerning Enslow Corporation's single product appear below: The break-even in monthly unit sales is closest to:

Kantor, Inc., produces and sells a single product whose selling price is $180.00 per unit and whose variable expense is $46.80 per unit. The company's fixed expense is $580,752 per month. Required: Determine the monthly break-even in either unit or total dollar sales. Show your work!

Assuming that the unit sales are unchanged, the total contribution margin will decrease if:

Last year, Black Company reported sales of $640,000, a contribution margin of $160,000, and a net loss of $40,000. Based on this information, the break-even point was:

Sadbury Corporation produces and sells a single product whose selling price is $210.00 per unit and whose variable expense is $73.50 per unit. The company's monthly fixed expense is $873,600. Required: a. Assume the company's monthly target profit is $27,300. Determine the unit sales to attain that target profit. Show your work! b. Assume the company's monthly target profit is $68,250. Determine the dollar sales to attain that target profit. Show your work!

Wertman Corporation produces and sells a single product with the following characteristics: The company is currently selling 3,000 units per month. Fixed expenses are $215,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Wertman Corporation. Refer to the original data when answering this question. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $20 per unit. In exchange, the sales staff would accept a decrease in their salaries of $52,000 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 300 units. What should be the overall effect on the company's monthly net operating income of this change?

Camden Inc. produces and sells two products. During the most recent month, Product M21B's sales were $35,000 and its variable expenses were $14,350. Product Y79X's sales were $20,000 and its variable expenses were $7,650. The company's fixed expenses were $30,820. Required: a. Determine the overall break-even point for the company. Show your work! b. If the sales mix shifts toward Product M21B with no change in total sales, what will happen to the break-even point for the company? Explain.

In the most recent month, Flamino Corporation's total contribution margin was $83,700 and its net operating income $21,200. Required: a. Compute the degree of operating leverage to two decimal places. b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 17% increase in sales.

A company has provided the following data: If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net operating income will:

If sales increase from $80,000 per year to $120,000 per year, and if the operating leverage is 5, then net operating income should increase by:

Legaard Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $220,000 per month. The company is currently selling 4,000 units per month. Required: The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $11,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,500 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -What is the company's contribution margin ratio?

Wertman Corporation produces and sells a single product with the following characteristics: The company is currently selling 3,000 units per month. Fixed expenses are $215,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Wertman Corporation. Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $19 and increase the advertising budget by $14,000 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?

Rosner Corporation sells a product for $150 per unit. The product's current sales are 32,500 units and its break-even sales are 24,050 units. -What is the margin of safety in dollars?

Lempka Corporation produces and sells a single product. Data concerning that product appear below: The unit sales to attain the company's monthly target profit of $17,000 is closest to:

Last year, Perry Company reported profits of $4,200. Its variable expenses totaled $66,000 or $6 per unit. The unit contribution margin was $3.00. The break-even point in unit sales for Perry Company is:

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: