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Exam 2: Costvolumeprofit Relationships

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Question 81

Multiple Choice

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Jerrel Corporation sells a product for $230 per unit. The product's current sales are 24,000 units and its break-even sales are 17,280 units. The margin of safety as a percentage of sales is closest to:

A) 61%
B) 28%
C) 72%
D) 39%

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

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Question 82

Multiple Choice

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Lofft Corporation has provided the following contribution format income statement. Assume that the following information is 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: (Round your intermediate calculations to 1 decimal place.)

A) 1.13%
B) 88.89%
C) 22.22%
D) 4.50%

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

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Question 83

Multiple Choice

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If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:

Bussy Corporation produces and sells a single product whose contribution margin ratio is 54%. The company's monthly fixed expense is $561,600 and the company's monthly target profit is $34,560. Required: Determine the dollar sales to attain the company's target profit. Show your work!

Remmel 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 $3 per unit and the sales volume decreases by 400 units, the net operating income would be closest to:

Jilk Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are $36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $103,000?

The smaller the contribution margin ratio, the smaller the amount of sales required to cover a given amount of fixed expenses.

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) :

Data concerning Bedwell Enterprises Corporation's single product appear below: The unit sales to attain the company's monthly target profit of $17,000 is closest to: (Round your intermediate calculations to 2 decimal places.)

Mechem Corporation produces and sells a single product. In April, the company sold 2,100 units. Its total sales were $205,800, its total variable expenses were $107,100, and its total fixed expenses were $82,400. Required: a. Construct the company's contribution format income statement for April. b. Redo the company's contribution format income statement assuming that the company sells 2,200 units.

Lydic Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The degree of operating leverage is closest to:

Maruca 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:

Data concerning Sinisi Corporation's single product appear below: The break-even in monthly unit sales 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? Show your work!

Jerrel Corporation sells a product for $230 per unit. The product's current sales are 24,000 units and its break-even sales are 17,280 units. What is the margin of safety in dollars?

A manufacturer of premium wire strippers has supplied the following data: The company's margin of safety in units is closest to: (Round per unit calculations to 2 decimal places.)

Data concerning Kardas Corporation's single product appear below: The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

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.)

How much will a company's net operating income change if it undertakes an advertising campaign given the following data:

Veren Inc. produces and sells two products. During the most recent month, Product F73A's sales were $27,000 and its variable expenses were $9,450. Product L75P's sales were $14,000 and its variable expenses were $5,310. The company's fixed expenses were $21,060. Required: a. Determine the overall break-even point for the company in total sales dollars. Show your work! b. If the sales mix shifts toward Product F73A with no change in total sales, what will happen to the break-even point for the company? Explain.