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Exam 6: Variable Costing and Segment Reporting: Tools for Management

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Question 61

True/False

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The overall contribution margin ratio for a company producing three products may be obtained by adding the contribution margin ratios for the three products and dividing the total by three.

A) True
B) False

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Question 62

Multiple Choice

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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:

A) 4.0
B) 1.5
C) 5.0
D) 21.0

E) A) and D)
F) A) and B)

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Question 63

Multiple Choice

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Seiersen Corporation's contribution format income statement for February appears below: The degree of operating leverage is closest to:

The July contribution format income statement of Raiche Corporation appears below: If the company's sales increase by 5%, its net operating income should increase by about:

Closser Corporation produces and sells two products. In the most recent month, Product M50S had sales of $39,000 and variable expenses of $12,870. Product H50G had sales of $12,000 and variable expenses of $4,980. The fixed expenses of the entire company were $33,050. The break-even point for the entire company is closest to:

A product sells for $10 per unit and has variable expenses of $6 per unit. Fixed expenses total $45,000 per month. How many units of the product must be sold each month to yield a monthly profit of $15,000?

Froio Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $26,570. The break-even point for the entire company is closest to:

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

Garcia Veterinary Clinic expects the following operating results next year: What is Garcia's break-even point next year in sales dollars?

For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.

Marano Corporation produces and sells a single product. In October, the company sold 6,200 units. Its total sales were $223,200, its total variable expenses were $105,400, and its total fixed expenses were $100,400. Required: a. Construct the company's contribution format income statement for October. b. Redo the company's contribution format income statement assuming that the company sells 6,400 units.

The margin of safety in dollars equals the excess of actual sales over budgeted sales.

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

Fost Corporation's contribution margin ratio is 20%. If the degree of operating leverage is 15 at the $225,000 sales level, net operating income at the $225,000 sales level must equal:

A cement manufacturer has supplied the following data: The company's contribution margin ratio is closest to:

Shauer, Inc., produces and sells a single product whose selling price is $150.00 per unit and whose variable expense is $33.00 per unit. The company's fixed expense is $436,410 per month. Required: Determine the monthly break-even in either unit or total dollar sales. Show your work!

Last year Easton Corporation reported sales of $720,000, a contribution margin ratio of 30% and a net loss of $24,000. Based on this information, the break-even point was:

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

Sammis Inc., which produces and sells a single product, has provided its contribution format income statement for January. If the company sells 2,600 units, its total contribution margin should be closest to:

The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Required: a. What is the company's contribution margin ratio? b. What is the company's break-even in units? c. If sales increase by 100 units, by how much should net operating income increase? d. How many units would the company have to sell to attain a target profit of $125,000? e. What is the company's margin of safety in dollars? f. What is the company's degree of operating leverage?