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Exam 5: Cost-Volume-Profit Relationships

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Question 131

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A company sells two products--J and K.The sales mix is expected to be $3 of sales of Product K for every $1 of sales of Product J.Product J has a contribution margin ratio of 40% whereas Product K has a contribution margin ratio of 50%.Annual fixed expenses are expected to be $120,000.The overall break-even point for the company in dollar sales is expected to be closest to:

A) $196,000
B) $200,000
C) $252,632
D) $263,420

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

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Question 132

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Majid Corporation sells a product for $240 per unit.The product's current sales are 41,300 units and its break-even sales are 36,757 units. What is the margin of safety in dollars?

A) $8,821,680
B) $6,608,000
C) $9,912,000
D) $1,090,320

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

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Question 133

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Iverson Corporation's variable expenses are 60% of sales.At a $400,000 sales level,the degree of operating leverage is 5.If sales increase by $40,000,the new degree of operating leverage will be (rounded) :

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

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

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

Singapore Candy Cane Corporation is a single product firm with the following cost structure for next year: What is the company's break-even point next year in sales dollars?

Mason Corporation's selling price was $20 per unit.Fixed expenses totaled $54,000,variable expenses were $14 per unit,and the company reported a profit of $9,000 for the year.The break-even point for Mason Corporation is:

Knezevich Corporation makes a product that sells for $230 per unit.The product's current sales are 36,900 units and its break-even sales are 32,103 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

In the most recent month,Sardella Corporation's total contribution margin was $46,200 and its net operating income $13,200. 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 10% increase in sales.

Lofft 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 10% increase in sales is closest to:

Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product. -If the company sells 9,700 units,its net operating income should be closest to:

Incremental analysis is an analytical approach that focuses only on those revenues and costs that will not change as a result of a decision.

Stauffer Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. The variable expense ratio is closest to:

A manufacturer of tiling grout has supplied the following data: -The company's contribution margin ratio is closest to:

Sjostrom Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. -If the variable cost per unit increases by $10,spending on advertising increases by $1,500,and unit sales increase by 15,800 units,the net operating income would be closest to:

Goodman Corporation has sales of 3,000 units at $80 per unit.Variable costs are 35% of the sales price.If total fixed costs are $66,000,the degree of operating leverage is:

Thornbrough Corporation produces and sells a single product with the following characteristics: The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Thornbrough Corporation.Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $11.Since the new component would increase the features of 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?

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. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Lemelin Corporation.Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $18 and increase the advertising budget by $37,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 1,600 units.What should be the overall effect on the company's monthly net operating income of this change?

Huitron Inc.expects its sales in September to be $143,000.The company's contribution margin ratio is 65% and its fixed monthly expenses are $62,000. Required: Estimate the company's net operating income for September,assuming that the fixed monthly expenses do not change.Show your work!