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Exam 6: Cost-Volume-Profit Relationships

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Question 61

Multiple Choice

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If the company sells 3,600 units, its total contribution margin should be closest to:

A) $39,200
B) $5,670
C) $43,200
D) $48,000

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

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Question 62

True/False

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A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase.

A) True
B) False

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Question 63

Multiple Choice

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Alpha Corporation reported the following data for its most recent year: sales, $1,000,000; variable expenses, $600,000; and fixed expenses, $300,000.The company's degree of operating leverage is closest to:

The break-even point in dollar sales is closest to:

Roddam Corporation produces and sells two products.Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $41,970.If the sales mix were to shift toward Product K09E with total dollar sales remaining constant, the overall break-even point for the entire company:

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.

The contribution margin ratio of Kuck Corporation's only product is 75%.The company's monthly fixed expense is $585,000 and the company's monthly target profit is $11,250. Required: Determine the dollar sales to attain the company's target profit.Show your work!

Gamma Corporation has sales of $120,000, a contribution margin of $48,000, and a net operating income of $12,000.The company's degree of operating leverage is:

This question is to be considered independently of all other questions relating to Thornbrough Corporation.Refer to the original data when answering this question. 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 a decrease in their salaries of $65,000 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 300 units.What should be the overall effect on the company's monthly net operating income of this change?

Carver Corporation produces a product which sells for $40.Variable manufacturing costs are $18 per unit.Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit.A selling commission of 15% of the selling price is paid on each unit sold.The contribution margin per unit is:

What is the company's margin of safety as a percentage of sales?

Moyas Corporation sells a single product for $20 per unit.Last year, the company's sales revenue was $300,000 and its net operating income was $24,000.If fixed expenses totaled $96,000 for the year, the break-even point in unit sales was:

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 company makes a single product that it sells for $16 per unit.Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%.If the company's actual sales are $224,000, its margin of safety is:

Muzzillo Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. Required: a.If the selling price increases by $4 per unit and the sales volume decreases by 300 units, what would be the estimated net operating income? b.If the variable cost per unit increases by $6, spending on advertising increases by $3,000, and unit sales increase by 1,800 units, what would be the estimated net operating income?

Which of the following is an assumption underlying standard CVP analysis?

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

Brihon Corporation produces and sells a single product.Data concerning that product appear below: Required: a.Assume the company's monthly target profit is $12,650.Determine the unit sales to attain that target profit.Show your work! b.Assume the company's monthly target profit is $63,250.Determine the dollar sales to attain that target profit.Show your work!

Evan's Electronics Boutique sells a digital camera.The following information was reported for the digital camera last month: Evan's margin of safety in dollars and percentage are closest to:

The break-even in monthly dollar sales is closest to: