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Exam 2: Cost-Volume-Profit Relationships

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Question 61

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Bowe Corporation's fixed monthly expenses are $21, 000 and its contribution margin ratio is 61%.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 $74, 000?

A) $7, 860
B) $45, 140
C) $24, 140
D) $53, 000

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

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Question 62

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Alcina Corporation produces and sells a single product whose contribution margin ratio is 80%.The company's monthly fixed expense is $576, 000 and the company's monthly target profit is $43, 200. Required: Determine the dollar sales to attain the company's target profit.Show your work!

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Question 63

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Larita Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $243, 000 per month.The company is currently selling 2, 000 units per month. Required: The marketing manager believes that a $28, 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? Show your work!

Hirz Corporation produces and sells a single product.Data concerning that product appear below: Required: Determine the monthly break-even in either unit or total dollar sales.Show your work!

A company that makes organic fertilizer has supplied the following data: The company's unit contribution margin is closest to:

Which of the following is NOT a correct definition of the break-even point?

Data concerning Sumter Corporation's single product appear below: Fixed expenses are $1, 024, 000 per month.The company is currently selling 8, 000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $6.Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 300 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!

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

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

The Clyde Corporation's variable expenses are 35% of sales.Clyde Corporation is contemplating an advertising campaign that will cost $25, 000.If sales increase by $75, 000, the company's net operating income will increase by:

A tile manufacturer has supplied the following data: What is the company's unit contribution margin?

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

Comings Corporation produces and sells two products.In the most recent month, Product R19J had sales of $30, 000 and variable expenses of $9, 000.Product O37G had sales of $34, 000 and variable expenses of $10, 840.The fixed expenses of the entire company were $35, 560.If the sales mix were to shift toward Product R19J with total dollar sales remaining constant, the overall break-even point for the entire company:

Xiong Corporation makes a product that sells for $130 per unit.The product's current sales are 14, 000 units and its break-even sales are 10, 220 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

Sales in North Corporation increased from $60, 000 per year to $63, 000 per year while net operating income increased from $10, 000 to $12, 000.Given this data, the company's degree of operating leverage must have been:

The break-even in units sold will decrease if there is an increase in:

Stoppkotte Corporation has provided its contribution format income statement for April. The degree of operating leverage is closest to:

If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease.

Frank Corporation manufacturers a single product that has a selling price of $20.00 per unit.Fixed expenses total $45, 000 per year, and the company must sell 5, 000 units to break even.If the company has a target profit of $13, 500, sales in units must be:

In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be higher in the company with a higher proportion of fixed expenses in its cost structure.