Accounting Chapter 5 2 Maack Corporations Contribution Margin Ratio 16

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38.

Maack Corporation’s contribution margin ratio is 16% and its fixed monthly expenses are

$44,000. If the company’s sales for a month are $299,000, what is the best estimate of the

company’s net operating income? Assume that the fixed monthly expenses do not change.

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39.

Bowe Corporation’s fixed monthly expenses are $21,000 and its contribution margin ratio

is 61%. 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 $74,000?

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40.

Bolding Inc.’s contribution margin ratio is 61% and its fixed monthly expenses are $42,000.

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 $126,000?

41.

Solen Corporation’s break-even-point in sales is $900,000, and its variable expenses are

75% of sales. If the company lost $32,000 last year, sales must have amounted to:

42.

Minist Corporation sells a single product for $15 per unit. Last year, the company’s sales

revenue was $225,000 and its net operating income was $18,000. If fixed expenses totaled

$72,000 for the year, the break-even point in unit sales was:

43.

Last year Easton Corporation reported sales of $720,000, a contribution margin ratio of

30% and a net loss of $24,000. Based on this information, the break-even point was:

44.

Arthur Corporation has a margin of safety percentage of 25% based on its actual sales.

The break-even point is $300,000 and the variable expenses are 45% of sales. Given this

information, the actual profit is:

45.

Fost Corporation’s contribution margin ratio is 20%. If the degree of operating leverage is

15 at the $225,000 sales level, net operating income at the $225,000 sales level must

equal:

46.

Hartung Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit

Percent of Sales

Selling price

$140

100%

Variable expenses

42

30%

Contribution margin

$98

70%

2,000 units

2,400 units

Sales (at $140 per unit)

Variable expenses (at $42 per unit and $55 per unit)

Contribution margin

Fixed expenses (decreases by $22,000)

Net operating income

Fixed expenses are $147,000 per month. The company is currently selling 2,000 units per

month. The marketing manager would like to introduce sales commissions as an incentive

for the sales staff. The marketing manager has proposed a commission of $13 per unit. In

exchange, the sales staff would accept a decrease in their salaries of $22,000 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 400 units. What

should be the overall effect on the company’s monthly net operating income of this

change?

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47.

Data concerning Wythe Corporation’s single product appear below:

Per Unit

Percent of

Sales

Selling price

$150

100%

Variable

expenses

90

60%

Contribution

margin

$60

40%

Sales (at $150 per unit

Variable expenses (at $90

Contribution margin

Fixed expenses (increase

Net operating income

Fixed expenses are $106,000 per month. The company is currently selling 2,000 units per

month. The marketing manager would like to cut the selling price by $15 and increase the

advertising budget by $5,000 per month. The marketing manager predicts that these two

changes would increase monthly sales by 800 units. What should be the overall effect on

the company’s monthly net operating income of this change?

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48.

Joly Corporation produces and sells a single product. Data concerning that product appear

below:

Per Unit

Percent of Sales

Selling price

$220

100%

Variable expenses

88

40%

Contribution margin

$132

60%

Sales (at $220 per unit and $204 per unit)

Variable expenses (at $88 per unit)

Contribution margin

Fixed expenses (increases by $33,000)

Net operating income

Fixed expenses are $511,000 per month. The company is currently selling 5,000 units per

month. The marketing manager would like to cut the selling price by $16 and increase the

advertising budget by $33,000 per month. The marketing manager predicts that these two

changes would increase monthly sales by 800 units. What should be the overall effect on

the company’s monthly net operating income of this change?

49.

Data concerning Massing Corporation’s single product appear below:

Per Unit

Percent of Sales

Selling price

$230

100%

Variable expenses

115

50%

Contribution margin

$115

50%

The company is currently selling 9,000 units per month. Fixed expenses are $837,000 per

month. The marketing manager believes that a $16,000 increase in the monthly advertising

budget would result in a 150 unit increase in monthly sales. What should be the overall

effect on the company’s monthly net operating income of this change?

Sales (at $230 per unit)

Contribution margin

Net operating income

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50.

Data concerning Hinkson Corporation’s single product appear below:

Per Unit

Percent of Sales

Selling price

$140

100%

Variable expenses

28

20%

Contribution margin

$112

80%

Sales (at $140 per unit)

Variable expenses (at $28 and $37 per unit)

Contribution margin

Fixed expenses (decreases by $60,000)

Net operating income

Fixed expenses are $720,000 per month. The company is currently selling 8,000 units per

month. The marketing manager would like to introduce sales commissions as an incentive

for the sales staff. The marketing manager has proposed a commission of $9 per unit. In

exchange, the sales staff would accept a decrease in their salaries of $60,000 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 100 units. What

should be the overall effect on the company’s monthly net operating income of this

change?

51.

The Clyde Corporation’s variable expenses are 35% of sales. Clyde Corporation is

contemplating an advertising campaign that will cost $25,000. If sales increase by $75,000,

the company’s net operating income will increase by:

52.

Dybala Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit

Percent of Sales

Selling price

$110

100%

Variable expenses

66

60%

Contribution margin

$44

40%

5,000 units

Sales (at $110 per unit)

Variable expenses (at $66 per unit)

Contribution margin

Fixed expenses ($6,000 increase)

Net operating income

The company is currently selling 5,000 units per month. Fixed expenses are $173,000 per

month. The marketing manager believes that a $6,000 increase in the monthly advertising

budget would result in a 170 unit increase in monthly sales. What should be the overall

effect on the company’s monthly net operating income of this change?

53.

Salley Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit

Percent of Sales

Selling price

$180

100%

Variable expenses

36

20%

Contribution margin

$144

80%

Fixed expenses are $1,133,000 per month. The company is currently selling 9,000 units

per month. Management is considering using a new component that would increase the

unit variable cost by $7. Since the new component would increase the features of the

company’s product, the marketing manager predicts that monthly sales would increase by

500 units. What should be the overall effect on the company’s monthly net operating

income of this change?

9,000 units

9,500 units

Sales ($180 per unit)

Variable expenses (at $36 per unit and $43 per unit)

Contribution margin

Fixed expenses

Net operating income

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