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Exam 2: Costvolumeprofit Relationships

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Question 31

True/False

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

A) True
B) False

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Question 32

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Gayne Corporation's contribution margin ratio is 12% and its fixed monthly expenses are $84,000. If the company's sales for a month are $738,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

A) $565,440
B) $654,000
C) $88,560
D) $4,560

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

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Question 33

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A manufacturer of cedar shingles has supplied the following data: The company's break-even in unit sales is closest to: (Round your intermediate calculations to 2 decimal places.)

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio.

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.

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!

Kelsay Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The contribution margin per unit is closest to:

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

Data concerning Bazin Corporation's single product appear below: Fixed expenses are $384,000 per month. The company is currently selling 6,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $46,000 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 500 units. What should be the overall effect on the company's monthly net operating income of this change?

Heathman Inc. produces and sells a single product. The selling price of the product is $230.00 per unit and its variable cost is $89.70 per unit. The fixed expense is $308,660 per month. The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

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:

Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to:

Keomuangtai Corporation produces and sells a single product. The company has provided its contribution format income statement for October. If the company sells 4,200 units, its net operating income should be closest to:

If fixed expenses increase by $10,000 per year, then the sales needed to break even will generally increase by more than $10,000.

Bristo Corporation has sales of 2,000 units at $35 per unit. Variable expenses are 40% of the selling price. If total fixed expenses are $22,000, the degree of operating leverage is:

Junior Bodway, Inc., has provided the following budgeted data: At the budgeted sales level of 10,000 units, what is the company's degree of operating leverage?

Junior Bodway, Inc., has provided the following budgeted data: How many units would the company have to sell in order to have a net operating income of $40,000?

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. The marketing manager believes that a $14,000 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?

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.

Ploeger Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The break-even point in dollar sales is closest to: