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Exam 5: Cost-Volume-Profit Relationships

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Question 141

True/False

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Two companies with the same margin of safety in dollars will also have the same total contribution margin.

A) True
B) False

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Question 142

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The following data pertains to activity and utility cost for two recent periods: Utility cost is a mixed cost with both fixed and variable components. Using the high-low method, the cost formula for utility cost is: (Round your intermediate calculations to 2 decimal places.)

A) Y = $1.65 X
B) Y = $1.75 X
C) Y = $3,750 + $1.75 X
D) Y = $6,000 + $1.25 X

E) A) and B)
F) A) and C)

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Question 143

Multiple Choice

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Iacob Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $103.40 per unit. The best estimate of the total contribution margin when 5,300 units are sold is: (Round your intermediate calculations to 2 decimal places.)

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? (Round your intermediate calculations to 2 decimal places.)

Bakan 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 variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)

Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 14,200 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 least-squares regression method of analysis, the estimated variable lubrication cost per machine hour is closest to:

Data concerning Wislocki Corporation's single product appear below: Fixed expenses are $466,000 per month. The company is currently selling 6,000 units per month.Required: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 an overall decrease in their salaries of $55,000 per month. 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?

Data concerning Lemelin Corporation's single product appear below: The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.Management is considering using a new component that would increase the unit variable cost by $3. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 200 units. What should be the overall effect on the company's monthly net operating income of this change?

Wimpy Incorporated produces and sells a single product. The selling price of the product is $235.00 per unit and its variable cost is $86.95 per unit. The fixed expense is $373,653 per month.The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

Steffen Corporation has three products with the following characteristics: The overall contribution margin ratio for the company as a whole is closest to:

A soft drink bottler incurred the following factory utility cost: $3,611 for 700 cases bottled and $3,702 for 1,000 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

Wilson Corporation's activity for the first six of the current year is as follows: Using the high-low method, the fixed portion of the electrical cost each month would be: (Round your intermediate calculations to 2 decimal places.)

Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $275,000 per month. The company is currently selling 4,000 units per month.Required:The marketing manager believes that a $13,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

The high and low points used in the high-low method tend to be unusual and therefore the cost formula for the mixed cost may not accurately represent all of the data.

Hiss Corporation's activity for the last six months is as follows: Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is 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. Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of 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?

Gayne Corporation's contribution margin ratio is 16% and its fixed monthly expenses are $45,500. If the company's sales for a month are $302,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

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:

Sales at East Corporation declined from $100,000 to $80,000, while net operating income declined by 300%. Given these data, the company must have had an operating leverage of: