208) Sebree Corporation has provided the following contribution format income statement.
Assume that the following information is within the relevant range.
Sales (7,000 units)
$
280,000
Variable expenses
168,000
Contribution margin
112,000
Fixed expenses
105,600
Net operating income
$
6,400
The degree of operating leverage is closest to:
A) 0.06
B) 17.50
C) 43.75
D) 0.02
209) Sebree Corporation has provided the following contribution format income statement.
Assume that the following information is within the relevant range.
Sales (7,000 units)
$
280,000
Variable expenses
168,000
Contribution margin
112,000
Fixed expenses
105,600
Net operating income
$
6,400
Using the degree of operating leverage, the estimated percent increase in net operating income as
the result of a 5% increase in sales is closest to:
A) 0.29%
B) 87.50%
C) 0.11%
D) 218.75%
210) The July contribution format income statement of Doxtater Corporation appears below:
Sales
$
564,400
Variable expenses
312,800
Contribution margin
251,600
Fixed expenses
193,800
Net operating income
$
57,800
The degree of operating leverage is closest to:
A) 0.23
B) 0.10
C) 4.35
D) 9.76
211) The July contribution format income statement of Doxtater Corporation appears below:
Sales
$
564,400
Variable expenses
312,800
Contribution margin
251,600
Fixed expenses
193,800
Net operating income
$
57,800
If the company’s sales increase by 19%, its net operating income should increase by about:
(Round your answer to the nearest whole percent.)
A) 10%
B) 19%
C) 83%
D) 186%
212) Dietrick Corporation produces and sells two products. Data concerning those products for
the most recent month appear below:
Product B32L
Product K84B
Sales
$
$
27,000
Variable expenses
$
$
14,670
Fixed expenses for the entire company were $42,550.
The break-even point for the entire company is closest to:
A) $42,550
B) $71,020
C) $69,754
D) $30,450
Sales
$
$
27,000
73,000
Variable expenses
14,670
28,470
Contribution margin
$
$
12,330
44,530
213) Dietrick Corporation produces and sells two products. Data concerning those products for
the most recent month appear below:
Product B32L
Product K84B
Sales
$
$
27,000
Variable expenses
$
$
14,670
Fixed expenses for the entire company were $42,550.
If the sales mix were to shift toward Product B32L with total sales remaining constant, the
overall break-even point for the entire company:
A) could increase or decrease.
B) would decrease.
C) would not change.
D) would increase.
Sales (a)
$
46,000
27,000
Variable expenses
13,800
14,670
Contribution margin (b)
$
32,200
12,330
Contribution margin ratio (b) ÷ (a)
214) Ingrum Corporation produces and sells two products. In the most recent month, Product
R38T had sales of $20,000 and variable expenses of $7,400. Product X08S had sales of $39,000
and variable expenses of $6,170. The fixed expenses of the entire company were $41,160.
The break-even point for the entire company is closest to:
A) $41,160
B) $17,840
C) $53,455
D) $54,730
215) Ingrum Corporation produces and sells two products. In the most recent month, Product
R38T had sales of $20,000 and variable expenses of $7,400. Product X08S had sales of $39,000
and variable expenses of $6,170. The fixed expenses of the entire company were $41,160.
If the sales mix were to shift toward Product R38T with total sales remaining constant, the
overall break-even point for the entire company:
A) would not change.
B) would increase.
C) would decrease.
D) could increase or decrease.
216) In July, Meers Corporation sold 3,700 units of its only product. Its total sales were
$107,300, its total variable expenses were $66,600, and its total fixed expenses were $34,800.
Required:
a. Construct the company’s contribution format income statement for July.
b. Redo the company’s contribution format income statement assuming that the company sells
3,400 units.
217) Mcconkey Corporation produces and sells a single product. The company’s contribution
format income statement for July appears below:
Sales (5,500 units)
$
357,500
Variable expenses
236,500
Contribution margin
121,000
Fixed expenses
102,200
Net operating income
$
18,800
Required:
Redo the company’s contribution format income statement assuming that the company sells
5,800 units.
Sales (5,800 units)
$
377,000
Variable expenses
249,400
Contribution margin
127,600
Fixed expenses
102,200
Net operating income
$
25,400
218) Giannini Inc., which produces and sells a single product, has provided the following
contribution format income statement for March:
Sales (5,900 units)
$
477,900
Variable expenses
206,500
Contribution margin
271,400
Fixed expenses
190,800
Net operating income
$
80,600
Required:
Redo the company’s contribution format income statement assuming that the company sells
5,500 units.
Sales (5,500 units)
$
445,500
Variable expenses
192,500
Contribution margin
253,000
Fixed expenses
190,800
Net operating income
$
62,200
219) 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.
220) Certosimo Corporation has provided the following contribution format income statement.
All questions concern situations that are within the relevant range.
Sales (7,000 units)
$350,000
Variable expenses
245,000
Contribution margin
105,000
Fixed expenses
97,500
Net operating income
$7,500
Required:
a. If sales increase to 7,040 units, what would be the estimated increase in net operating income?
b. If sales decline to 6,900 units, what would be the estimated net operating income?
Selling price per unit ($350,000 ÷ 7,000 units)
Variable cost per unit ($245,000 ÷ 7,000 units)
Unit contribution margin
Unit contribution margin (a)
Increased unit sales (b)
Increase in net operating income (a) × (b)
Unit contribution margin (a)
Unit sales (b)
units
Contribution margin (a) × (b)
Fixed expenses
Net operating income
194
221) Muzzillo Corporation has provided the following contribution format income statement. All
questions concern situations that are within the relevant range.
Sales (3,000 units)
$180,000
Variable expenses
126,000
Contribution margin
54,000
Fixed expenses
52,200
Net operating income
$1,800
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?
196
222) Montesdeoca Corporation has provided the following contribution format income
statement. All questions concern situations that are within the relevant range.
Sales (2,000 units)
$120,000
Variable expenses
72,000
Contribution margin
48,000
Fixed expenses
33,600
Net operating income
$14,400
Required:
a. If sales decline to 1,900 units, what would be the estimated net operating income?
b. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what
would be the estimated net operating income?
c. What is the break-even point in dollar sales?
223) Sattler Corporation has provided the following contribution format income statement. All
questions concern situations that are within the relevant range.
Sales (8,000 units)
$480,000
Variable expenses
336,000
Contribution margin
144,000
Fixed expenses
142,200
Net operating income
$1,800
Required:
a. What is the contribution margin per unit?
b. What is the variable expense ratio?
c. If sales decline to 7,900 units, what would be the estimated net operating income?
d. If the variable cost per unit increases by $5, spending on advertising increases by $2,000, and
unit sales increase by 3,400 units, what would be the estimated net operating income?
e. What is the break-even point in dollar sales?
f. Estimate how many units must be sold to achieve a target profit of $50,400.
g. What is the margin of safety percentage?
h. Using the degree of operating leverage, what is the estimated percent increase in net operating
income of a 15% increase in sales?
Total contribution margin (a)
Total unit sales (b)
Unit contribution margin (a) ÷ (b)
Selling price per unit ($480,000 ÷ 8,000 units)
Variable cost per unit ($336,000 ÷ 8,000 units)
Unit contribution margin
Unit contribution margin (a)
Unit sales (b)
Contribution margin (a) × (b)
Fixed expenses
Net operating income
200
224) Laraia Corporation has provided the following contribution format income statement. All
questions concern situations that are within the relevant range.
Sales (3,000 units)
$150,000
Variable expenses
90,000
Contribution margin
60,000
Fixed expenses
48,000
Net operating income
$12,000
Required:
a. What is the contribution margin per unit?
b. What is the contribution margin ratio?
c. What is the variable expense ratio?
d. If sales increase to 3,050 units, what would be the estimated increase in net operating income?
e. If sales decline to 2,900 units, what would be the estimated net operating income?
f. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what
would be the estimated net operating income?
g. If the variable cost per unit increases by $5, spending on advertising increases by $3,000, and
unit sales increase by 450 units, what would be the estimated net operating income?
h. What is the break-even point in unit sales?
i. What is the break-even point in dollar sales?
j. Estimate how many units must be sold to achieve a target profit of $54,000.
k. What is the margin of safety in dollars?
l. What is the margin of safety percentage?
m. What is the degree of operating leverage?
n. Using the degree of operating leverage, what is the estimated percent increase in net operating
income of a 15% increase in sales?