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Exam 6: Cost-Volume-Profit Relationships

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Question 121

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To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?

A) (Fixed expenses + Target net profit) /Total contribution margin
B) (Fixed expenses + Target net profit) /Contribution margin ratio
C) Fixed expenses/Contribution margin per unit
D) Target net profit/Contribution margin ratio

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

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Question 122

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Lubke Corporation's contribution format income statement for the most recent month follows: 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 3% increase in sales.

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a.Degree of operating leverage = Contrib...

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Question 123

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Hevesy Inc.produces and sells a single product.The selling price of the product is $200.00 per unit and its variable cost is $80.00 per unit.The fixed expense is $300,000 per month.The break-even in monthly unit sales is closest to:

The degree of operating leverage is closest to:

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 believes that a $28,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

If the company sells 3,500 units, its net operating income should be closest to:

In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be lower in the company with a higher proportion of fixed expenses in its cost structure.

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:

Kuzio Corporation produces and sells a single product.Data concerning that product appear below: The company is currently selling 6,000 units per month.Fixed expenses are $263,000 per month.The marketing manager believes that a $5,000 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

What is the company's unit contribution margin?

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

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

Coultrap Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. The contribution margin per unit is closest to:

An increase in the number of units sold will decrease a company's break-even point.

If sales decline to 2,900 units, the net operating income would be closest to:

In a CVP graph, the anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line (sales)and the total fixed expense line.

Mishoe Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. The break-even point in unit sales is closest to:

The company's degree of operating leverage is closest to:

The contribution margin ratio 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!