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55.
On January 1, 2016, Randolph Co. increased its direct labor wage rates. All other budgeted
costs and revenues were unchanged. How did this increase affect Randolph's budgeted
break-even point and budgeted margin of safety? (CPA adapted)
Budgeted Break-even
Point
Budgeted Margin of
Safety
A.
Increase
Increase
B.
Increase
Decrease
C.
Decrease
Decrease
D.
Decrease
Increase
56.
A company's break-even point will not be changed by:
3-43
57.
If both the variable cost per unit and the selling price per unit increase, the new
contribution margin ratio in relation to the old contribution margin ratio will be:
58.
Evergreen Corporation manufactures circuit boards and is in the process of preparing next
year's budget. The pro forma income statement for the current year is presented below.
Sales
$3,500,000
Cost of sales:
Direct Material
$500,000
Direct labor
250,000
Variable Overhead
275,000
Fixed Overhead
600,000
1,625,000
Gross Profit
$1,875,000
Selling and General &
Admin. Exp.
Variable
750,000
Fixed
250,000
1,000,000
Operating Income
$875,000
3-44
59.
Evergreen Corporation manufactures circuit boards and is in the process of preparing next
year's budget. The pro forma income statement for the current year is presented below.
Sales
$3,500,000
Cost of sales:
Direct Material
$500,000
Direct labor
250,000
Variable Overhead
275,000
Fixed Overhead
600,000
1,625,000
Gross Profit
$1,875,000
Selling and General &
Admin. Exp.
Variable
750,000
Fixed
250,000
1,000,000
Operating Income
$875,000
3-46
60.
Evergreen Corporation manufactures circuit boards and is in the process of preparing next
year's budget. The pro forma income statement for the current year is presented below.
Sales
$3,500,000
Cost of sales:
Direct Material
$500,000
Direct labor
250,000
Variable Overhead
275,000
Fixed Overhead
600,000
1,625,000
Gross Profit
$1,875,000
Selling and General &
Admin. Exp.
Variable
750,000
Fixed
250,000
1,000,000
Operating Income
$875,000
61.
Evergreen Corporation manufactures circuit boards and is in the process of preparing next
year's budget. The pro forma income statement for the current year is presented below.
Sales
$3,500,000
Cost of sales:
Direct Material
$500,000
Direct labor
250,000
Variable Overhead
275,000
Fixed Overhead
600,000
1,625,000
Gross Profit
$1,875,000
Selling and General &
Admin. Exp.
Variable
750,000
Fixed
250,000
1,000,000
Operating Income
$875,000
62.
You have been provided with the following information:
Per Unit
Total
Sales
$15
$45,000
Less variable expenses
9
27,000
Contribution margin
6
18,000
Less fixed expenses
12,000
Operating profit
$6,000
If unit sales decrease by 10%, how much will fixed costs have to be reduced by to
maintain the current operating profit?
63.
You have been provided with the following information:
Total
Sales
$90,000
Less Variable expenses
54,000
Contribution margin
36,000
Less fixed expenses
24,000
Operating profit
$12,000
64.
You have been provided with the following information:
Total
Sales
$90,000
Less Variable expenses
54,000
Contribution margin
36,000
Less fixed expenses
24,000
Operating profit
$12,000
65.
With regard to the CVP graph, which of the following statements is not correct?
66.
Tower Company manufactures and sells a single product with a positive contribution
margin. If the selling price and the variable cost per unit both increase 5% and fixed costs
do not change, what is the effect on the contribution margin per unit and the contribution
margin ratio?
Contribution margin
per unit
Contribution margin
ratio
A.
No change
No change
B.
Increase
Increase
C.
Increase
No change
D.
Increase
Decrease
67.
Which of the following formulas is used to calculate the contribution margin ratio?
68.
Flower Company manufactures and sells a single product that has a positive contribution
margin. If the selling price and variable costs both decrease by 5% and fixed costs do not
change, then what would be the effect on the contribution margin per unit and the
contribution margin ratio?
Contribution margin
per unit
Contribution margin
ratio
A.
Decrease
Decrease
B.
Decrease
No change
C.
No change
Decrease
D.
No change
No change
69.
If Q equals the level of output, P is the selling price per unit, V is the variable cost per unit,
and F is the fixed cost, then the break-even point in units is:
70.
Which of the following would not cause the break-even point to change?
71.
Which of the following would not cause the break-even point to change?
72.
If the fixed costs for a product increase and the variable costs (as a percentage of sales
dollars) increase, what will be the effect on the contribution margin ratio and the break-
even point, respectively?
Contribution Margin
Ratio
Break-even
Point
A.
Decrease
Increase
B.
Increase
Decrease
C.
Decrease
Decrease
D.
Increase
Increase
73.
A company's break-even point will not be increased by:
74.
Obtuse Company's fixed costs total $150,000, its variable cost ratio is 60% and its variable
costs are $4.50 per unit. Based on this information, the break-even point in units is:
75.
Bargain Company's contribution margin ratio is 15%. If the degree of operating leverage is
12 at the $150,000 sales level, operating profit at the $150,000 sales level must equal:
