107) Mcmurtry Corporation sells a product for $170 per unit. The product’s current sales are
10,000 units and its break-even sales are 8,100 units. The margin of safety as a percentage of
sales is closest to:
A) 23%
B) 81%
C) 19%
D) 77%
108) Cubie Corporation has provided the following data concerning its only product:
Selling price
$
100
per unit
Current sales
10,600
units
Break-even sales
9,540
units
What is the margin of safety in dollars?
A) $1,060,000
B) $106,000
C) $954,000
D) $706,667
109) Ensley Corporation has provided the following data concerning its only product:
Selling price
$
200
per unit
Current sales
30,300
units
Break-even sales
21,816
units
The margin of safety as a percentage of sales is closest to:
A) 61%
B) 28%
C) 72%
D) 39%
110) Evan’s Electronics Boutique sells a digital camera. The following information was reported
for the digital camera last month:
Sales
$
17,600
Variable expenses
9,680
Contribution margin
7,920
Fixed expenses
3,600
Net operating income
$
4,320
Evan’s margin of safety in dollars and percentage are closest to:
A) $8,000 and 83%
B) $9,600 and 120%
C) $8,000 and 45%
D) $9,600 and 55%
111) Majid Corporation sells a product for $240 per unit. The product’s current sales are 41,300
units and its break-even sales are 36,757 units.
What is the margin of safety in dollars?
A) $8,821,680
B) $6,608,000
C) $9,912,000
D) $1,090,320
112) Rushenberg Corporation’s operating leverage is 10.8. If the company’s sales increase by
14%, its net operating income should increase by about:
A) 151.2%
B) 14.0%
C) 77.1%
D) 10.8%
113) The February contribution format income statement of Mcabier Corporation appears below:
Sales
$
211,200
Variable expenses
96,000
Contribution margin
115,200
Fixed expenses
84,100
Net operating income
$
31,100
The degree of operating leverage is closest to:
A) 0.27
B) 6.79
C) 3.70
D) 0.15
114) Sales at East Corporation declined from $100,000 to $80,000, while net operating income
declined by 300%. Given these data, the company must have had an operating leverage of:
A) 15
B) 2.7
C) 30
D) 12
115) Gamma Corporation has sales of $120,000, a contribution margin of $48,000, and a net
operating income of $12,000. The company’s degree of operating leverage is:
A) 2.5
B) 4.0
C) 10.0
D) 4.8
116) Bendel Inc. has an operating leverage of 7.3. If the company’s sales increase by 3%, its net
operating income should increase by about:
A) 243.3%
B) 7.3%
C) 21.9%
D) 3.0%
117) Alpha Corporation reported the following data for its most recent year: sales, $1,000,000;
variable expenses, $600,000; and fixed expenses, $300,000. The company’s degree of operating
leverage is closest to:
A) 0.25
B) 2.0
C) 4.0
D) 3.3
118) Lofft Corporation has provided the following contribution format income statement.
Assume that the following information is within the relevant range.
Sales (2,000 units)
$
120,000
Variable expenses
90,000
Contribution margin
30,000
Fixed expenses
16,500
Net operating income
$
13,500
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:
A) 1.13%
B) 88.89%
C) 22.22%
D) 4.50%
119) Serfass Corporation’s contribution format income statement for July appears below:
Sales
$
260,000
Variable expenses
176,000
Contribution margin
84,000
Fixed expenses
71,800
Net operating income
$
12,200
The degree of operating leverage is closest to:
A) 0.05
B) 0.15
C) 21.31
D) 6.89
120) Bristo Corporation has sales of 2,000 units at $35 per unit. Variable expenses are 40% of
the selling price. If total fixed expenses are $22,000, the degree of operating leverage is:
A) 0.79
B) 1.40
C) 2.10
D) 3.50
121) Lydic Corporation has provided the following contribution format income statement.
Assume that the following information is within the relevant range.
Sales (4,000 units)
$
160,000
Variable expenses
112,000
Contribution margin
48,000
Fixed expenses
38,400
Net operating income
$
9,600
The degree of operating leverage is closest to:
A) 5.00
B) 0.20
C) 16.67
D) 0.06
122) A company sells two products—J and K. The sales mix is expected to be $3 of sales of
Product K for every $1 of sales of Product J. Product J has a contribution margin ratio of 40%
whereas Product K has a contribution margin ratio of 50%. Annual fixed expenses are expected
to be $120,000. The overall break-even point for the company in dollar sales is expected to be
closest to:
A) $196,000
B) $200,000
C) $252,632
D) $263,420
123) Roddam Corporation produces and sells two products. Data concerning those products for
the most recent month appear below:
Product K09E
Product G17B
Sales
$
28,000
$
38,000
Variable expenses
$
11,200
$
8,600
The fixed expenses of the entire company were $41,970. If the sales mix were to shift toward
Product K09E with total dollar sales remaining constant, the overall break-even point for the
entire company:
A) would increase.
B) could increase or decrease.
C) would not change.
D) would decrease.
Sales (a)
28,000
38,000
Variable expenses
11,200
8,600
Contribution margin (b)
16,800
29,400
CM ratio (b) ÷ (a)
%
%
124) Steffen Corporation has three products with the following characteristics:
Product A
Product B
Product C
Monthly sales in dollars
$
120,000
$
160,000
$
200,000
Contribution margin ratio
20
%
40
%
16
%
The overall contribution margin ratio for the company as a whole is closest to:
A) 35.3%
B) 75.0%
C) 25.0%
D) 28.5%
Product A
Product B
Product C
Total
in dollars
margin ratio
margin
125) Mcdale Inc. produces and sells two products. Data concerning those products for the most
recent month appear below:
Product I49V
Product Z50U
Sales
$
15,000
$
14,000
Variable expenses
$
3,300
$
2,790
The fixed expenses of the entire company were $18,460. The break-even point for the entire
company is closest to:
A) $23,367
B) $10,540
C) $24,550
D) $18,460
Sales
$
$
14,000
29,000
Variable expenses
2,790
6,090
Contribution margin
$
$
11,210
22,910
126) Sunnripe Corporation manufactures and sells two types of beach towels, standard and
deluxe. Sunnripe expects the following operating results next year:
Standard
Deluxe
Total sales
$
450,000
$
50,000
Total variable expenses
$
360,000
$
20,000
Sunnripe expects to have a total of $57,600 in fixed expenses next year. What is Sunnripe’s
overall break-even point next year in sales dollars?
A) $72,000
B) $144,000
C) $192,000
D) $240,000
Total sales
$
450,000
$
50,000
$
500,000
Total variable expenses
360,000
20,000
380,000
Total contribution margin
$
90,000
$
30,000
$
120,000
127) Flesch Corporation produces and sells two products. In the most recent month, Product
C90B had sales of $24,000 and variable expenses of $6,480. Product Y45E had sales of $29,000
and variable expenses of $11,010. The fixed expenses of the entire company were $32,280. If the
sales mix were to shift toward Product C90B with total dollar sales remaining constant, the
overall break-even point for the entire company:
A) would decrease.
B) would increase.
C) could increase or decrease.
D) would not change.
128) Newham Corporation produces and sells two products. In the most recent month, Product
R10L had sales of $28,000 and variable expenses of $6,440. Product X96N had sales of $22,000
and variable expenses of $7,560. The fixed expenses of the entire company were $32,710. The
break-even point for the entire company is closest to:
A) $32,710
B) $45,431
C) $46,710
D) $17,290
129) Keomuangtai Corporation produces and sells a single product. The company has provided
its contribution format income statement for October.
Sales (4,600 units)
$
266,800
Variable expenses
179,400
Contribution margin
87,400
Fixed expenses
62,200
Net operating income
$
25,200
If the company sells 4,500 units, its total contribution margin should be closest to:
A) $85,500
B) $24,652
C) $87,400
D) $81,600