Accounting Chapter 5 Chapter 5_version1 Lang in Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range

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Student name:__________

1) Giannini Incorporated, which produces and sells a single product, has provided the

following contribution format income statement for March:

Sales (5,000 units) $ 285,000

Variable expenses 150,000

Contribution margin 135,000

Fixed expenses 104,000

Net operating income $ 31,000

Required:

Redo the company’s contribution format income statement assuming that the company sells

5,200 units.

2) Mechem Corporation produces and sells a single product. In April, the company sold

2,000 units. Its total sales were $160,000, its total variable expenses were $78,600, and its total

fixed expenses were $55,500.

Required:

a. Construct the company’s contribution format income statement for April. (Do not round

intermediate calculations.)

b. Redo the company’s contribution format income statement assuming that the company sells

1,900 units. (Do not round intermediate calculations.)

3) 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

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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?

4) 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?

5) 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

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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?

6) 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 volume?

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7) 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 volume?

8) Zaccaria Corporation has provided the following contribution format income statement.

All questions concern situations that are within the relevant range.

Sales (5,000 units) $ 300,000

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Variable expenses 240,000

Contribution margin 60,000

Fixed expenses 58,800

Net operating income $ 1,200

Required:

a. What is the contribution margin ratio?

b. If sales increase to 5,040 units, what would be the estimated increase in net operating income?

c. If the selling price increases by $4 per unit and the sales volume decreases by 400 units, what

would be the estimated net operating income?

d. What is the break-even point in unit sales?

e. What is the margin of safety in dollars?

f. What is the degree of operating leverage?

9) Stonebraker Corporation has provided the following contribution format income

statement. All questions concern situations that are within the relevant range.

Sales (9,000 units) $ 270,000

Variable expenses 189,000

Contribution margin 81,000

Fixed expenses 77,400

Net operating income $ 3,600

Required:

a. If sales increase to 9,040 units, what would be the estimated increase in 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 19,200 units, what would be the estimated net operating income?

c. Estimate how many units must be sold to achieve a target profit of $26,100.

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10) Mancine 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 42,000

Net operating income $ 18,000

Required:

a. What is the break-even point in unit sales?

b. Estimate how many units must be sold to achieve a target profit of $50,000.

11) Sun Corporation has provided the following contribution format income statement. All

questions concern situations that are within the relevant range.

Sales (5,000 units) $ 250,000

Variable expenses 162,500

Contribution margin 87,500

Fixed expenses 71,750

Net operating income $ 15,750

Required:

a. What is the margin of safety in dollars?

b. What is the degree of operating leverage?

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12) Langin Corporation has provided the following contribution format income statement.

All questions concern situations that are within the relevant range.

Sales (9,000 units) $ 540,000

Variable expenses 324,000

Contribution margin 216,000

Fixed expenses 204,000

Net operating income $ 12,000

Required:

a. What is the margin of safety percentage?

b. Using the degree of operating leverage, what is the estimated percent increase in net operating

income of a 15% increase in sales?

13) Sarratt Corporation’s contribution margin ratio is 78% and its fixed monthly expenses are

$47,000. Assume that the company’s sales for May are expected to be $106,000.

Required:

Estimate the company’s net operating income for May, assuming that the fixed monthly

expenses do not change.

14) Data concerning Wislocki Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 160 100%

Variable expenses 40 25%

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Contribution margin $ 120 75%

Fixed expenses are $1,041,000 per month. The company is currently selling 9,600 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 $13 per unit. In exchange, the sales

staff would accept an overall decrease in their salaries of $105,000 per month. 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?

15) Naumann Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $ 210 100%

Variable expenses 42 20%

Contribution margin $ 168 80%

Fixed expenses are $130,000 per month. The company is currently selling 1,200 units per month.

Required:

Management is considering using a new component that would increase the unit variable cost by

$48. Since the new component would improve the company’s product, the marketing manager

predicts that monthly sales would increase by 400 units. What should be the overall effect on the

company’s monthly net operating income of this change if fixed expenses are unaffected?

16) Shelhorse Corporation produces and sells a single product. Data concerning that product

appear below:

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Per Unit Percent of Sales

Selling price $ 240 100%

Variable expenses 60 25%

Contribution margin $ 180 75%

Fixed expenses are $364,000 per month. The company is currently selling 5,900 units per month.

Required:

The marketing manager believes that a $21,000 increase in the monthly advertising budget

would result in a 130 unit increase in monthly sales. What should be the overall effect on the

company’s monthly net operating income of this change?

17) The contribution margin ratio of Kuck Corporation’s only product is 67%. The company’s

monthly fixed expense is $454,300 and the company’s monthly target profit is $40,300.

Required:

Determine the dollar sales to attain the company’s target profit.

18) 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.

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19) 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.

20) Giannini Incorporated, 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.

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21) 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.

22) The management of Merklin Corporation expects sales in May to be $105,000. The

company’s contribution margin ratio is 70% and its fixed monthly expenses are $48,000.

Required:

Estimate the company’s net operating income for May, assuming that the fixed monthly

expenses do not change.

23) Sarratt Corporation’s contribution margin ratio is 62% and its fixed monthly expenses are

$91,000. Assume that the company’s sales for May are expected to be $193,000.

Required:

Estimate the company’s net operating income for May, assuming that the fixed monthly

expenses do not change.

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24) Huitron Incorporated expects its sales in September to be $143,000. The company’s

contribution margin ratio is 65% and its fixed monthly expenses are $62,000.

Required:

Estimate the company’s net operating income for September, assuming that the fixed monthly

expenses do not change.

25) Hamiel Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $ 240 100%

Variable expenses 168 70%

Contribution margin $ 72 30%

Fixed expenses are $301,000 per month. The company is currently selling 5,000 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 $16 per unit. In exchange, the sales

staff would accept an overall decrease in their salaries of $68,000 per month. The marketing

manager predicts that introducing this sales incentive would increase monthly sales by 200 units.

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

change?

26) Data concerning Wislocki Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 130 100%

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Variable expenses 26 20%

Contribution margin $ 104 80%

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?

27) Naumann Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $ 100 100%

Variable expenses 30 30%

Contribution margin $ 70 70%

Fixed expenses are $234,000 per month. The company is currently selling 4,000 units per month.

Required:

Management is considering using a new component that would increase the unit variable cost

by $7. Since the new component would improve 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 if fixed expenses are unaffected?

28) Data concerning Neuner Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 220 100%

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Variable expenses 88 40%

Contribution margin $ 132 60%

Fixed expenses are $425,000 per month. The company is currently selling 4,000 units per month.

Required:

The marketing manager would like to cut the selling price by $11 and increase the advertising

budget by $23,700 per month. The marketing manager predicts that these two changes would

increase monthly sales by 400 units. What should be the overall effect on the company’s monthly

net operating income of this change?

29) Bethard Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $ 120 100%

Variable expenses 24 20%

Contribution margin $ 96 80%

Fixed expenses are $354,000 per month. The company is currently selling 5,000 units per month.

Required:

The marketing manager would like to cut the selling price by $8 and increase the advertising

budget by $23,000 per month. The marketing manager predicts that these two changes would

increase monthly sales by 600 units. What should be the overall effect on the company’s monthly

net operating income of this change?

30) Data concerning Cavaluzzi Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 110 100%

Variable expenses 44 40%

Contribution margin $ 66 60%

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Fixed expenses are $440,000 per month. The company is currently selling 8,000 units per month.

Required:

The marketing manager believes that an $8,000 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?

31) Shelhorse Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $ 140 100%

Variable expenses 56 40%

Contribution margin $ 84 60%

Fixed expenses are $275,000 per month. The company is currently selling 4,000 units per month.

Required:

The marketing manager believes that a $13,000 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?

32) Data concerning Milian Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 130 100%

Variable expenses 39 30%

Contribution margin $ 91 70%

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Fixed expenses are $66,000 per month. The company is currently selling 1,000 units per month.

Required:

Management is considering using a new component that would increase the unit variable cost

by $15. Since the new component would improve the company’s product, the marketing manager

predicts that monthly sales would increase by 200 units. What should be the overall effect on the

company’s monthly net operating income of this change if fixed expenses are unaffected?

33) Cleghorn Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 160.00

Variable expense per unit $ 70.40

Fixed expense per month $ 153,216

Required:

Determine the monthly break-even in total dollar sales.

34) Hamernik, Incorporated, produces and sells a single product whose selling price is

$240.00 per unit and whose variable expense is $72.00 per unit. The company’s fixed expense is

$372,960 per month.

Required:

Determine the monthly break-even in either unit or total dollar sales.

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35) Frisch Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 170.00

Variable expense per unit $ 83.30

Fixed expense per month $ 138,720

Required:

Determine the monthly break-even in either unit or total dollar sales.

36) Yamakawa Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 200.00

Variable expense per unit $ 64.00

Fixed expense per month $ 670,480

Required:

Determine the monthly break-even in unit sales.

37) Liz, Incorporated, produces and sells a single product. The product sells for $130.00 per

unit and its variable expense is $48.10 per unit. The company’s monthly fixed expense is

$223,587.

Required:

Determine the monthly break-even in unit sales.

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38) Malensek International, Incorporated, produces and sells a single product. The product

sells for $240.00 per unit and its variable expense is $55.20 per unit. The company’s monthly

fixed expense is $249,480.

Required:

Determine the monthly break-even in total dollar sales.

39) Brihon Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 230.00

Variable expense per unit $ 103.50

Fixed expense per month $ 518,650

Required:

a. Assume the company’s monthly target profit is $12,650. Determine the unit sales to attain

that target profit.

b. Assume the company’s monthly target profit is $63,250. Determine the dollar sales to attain

that target profit.

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40) The contribution margin ratio of Kuck Corporation’s only product is 75%. The company’s

monthly fixed expense is $585,000 and the company’s monthly target profit is $11,250.

Required:

Determine the dollar sales to attain the company’s target profit.

41) Rachal Corporation produces and sells a single product whose selling price is $150.00 per

unit and whose variable expense is $57.00 per unit. The company’s monthly fixed expense is

$381,300.

Required:

a. Assume the company’s monthly target profit is $9,300. Determine the unit sales to attain that

target profit.

b. Assume the company’s monthly target profit is $18,600. Determine the dollar sales to attain

that target profit.

42) Bussy Corporation produces and sells a single product whose contribution margin ratio is

54%. The company’s monthly fixed expense is $561,600 and the company’s monthly target profit

is $34,560.

Required:

Determine the dollar sales to attain the company’s target profit.

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43) Hawver Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 180.00

Variable expense per unit $ 81.00

Fixed expense per month $ 594,000

Required:

Assume the company’s monthly target profit is $19,800. Determine the unit sales to attain that

target profit.

44) The selling price of Old Corporation’s only product is $180.00 per unit and its variable

expense is $37.80 per unit. The company’s monthly fixed expense is $483,480.

Required:

Assume the company’s monthly target profit is $56,880. Determine the unit sales to attain that

target profit.

45) Dickus Corporation’s only product sells for $100 per unit. Its current sales are 35,600

units and its break-even sales are 29,192 units.

Required:

Compute the margin of safety in both dollars and as a percentage of sales.

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46) Haslem Incorporated has provided the following data concerning its only product:

Selling price $ 100 per unit

Current sales 37,300 units

Break-even sales 26,483 units

Required:

Compute the margin of safety in both dollars and as a percentage of sales.

47) Knezevich Corporation makes a product that sells for $230 per unit. The product’s current

sales are 36,900 units and its break-even sales are 32,103 units.

Required:

Compute the margin of safety in both dollars and as a percentage of sales.

48) Lubke Corporation’s contribution format income statement for the most recent month

follows:

Sales $ 506,000

Variable expenses 236,500

Contribution margin 269,500

Fixed expenses 241,700

Net operating income $ 27,800

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 volume.

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49) Mcquage Corporation has provided its contribution format income statement for July.

Sales $ 558,000

Variable expenses 306,900

Contribution margin 251,100

Fixed expenses 209,800

Net operating income $ 41,300

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 19% increase in sales volume.

50) In the most recent month, Sardella Corporation’s total contribution margin was $46,200

and its net operating income $13,200.

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 10% increase in sales volume.

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51) Brancati Incorporated produces and sells two products. Data concerning those products

for the most recent month appear below:

Product W07C Product B29Z

Sales $ 25,000 $ 27,000

Variable expenses $ 7,000 $ 8,600

Fixed expenses for the entire company were $32,860.

Required:

a. Determine the overall break-even point for the company in total sales dollars.

b. If the sales mix shifts toward Product W07C with no change in total sales, what will happen

to the break-even point for the company? Explain.

52) Veren Incorporated produces and sells two products. During the most recent month,

Product F73A’s sales were $27,000 and its variable expenses were $9,450. Product L75P’s sales

were $14,000 and its variable expenses were $5,310. The company’s fixed expenses were

$21,060.

Required:

a. Determine the overall break-even point for the company in total sales dollars.

b. If the sales mix shifts toward Product F73A with no change in total sales, what will happen

to the break-even point for the company? Explain.

53) If the contribution margin is not sufficient to cover fixed expenses:

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A) total profit equals total expenses.

B) contribution margin is negative.

C) a loss occurs.

D) variable expenses equal contribution margin.

54) Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

A) A Cost-Volume-Profit graph shows the maximum possible profit.

B) A Cost-Volume-Profit graph shows the break-even point as the intersection of the

total sales revenue line and the total expense line.

C) A Cost-Volume-Profit graph assumes that total expense varies in direct proportion to

unit sales.

D) A Cost-Volume-Profit graph shows the operating leverage as the gap between total

sales revenue and total expense at the actual level of sales.

55) Which of the following is correct? The break-even point occurs on the Cost-Volume-

Profit graph where:

A) total profit equals total expenses.

B) total profit equals total fixed expenses.

C) total contribution margin equals total fixed expenses.

D) total variable expenses equal total contribution margin.

56) Which of the following is true regarding the contribution margin ratio of a company that

produces only a single product?

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A) As fixed expenses decrease, the contribution margin ratio increases.

B) The contribution margin ratio multiplied by the selling price per unit equals the

contribution margin per unit.

C) The contribution margin ratio will decline as unit sales decline.

D) The contribution margin ratio equals the selling price per unit less the variable

expense ratio.

57) Mossfeet Shoe Corporation is a single product firm. The company is predicting that a

price increase next year will not cause unit sales to decrease. What effect would this price

increase have on the following items for next year?

Contribution Margin Ratio Break-even Point

A) Increase Decrease

B) Decrease Decrease

C) Increase No effect

D) Decrease No effect

A) Choice A

B) Choice B

C) Choice C

D) Choice D

58) If a company increases its selling price by $2 per unit due to an increase in its variable

labor cost of $2 per unit, the break-even point in units will:

A) decrease.

B) increase.

C) not change.

D) change but direction cannot be determined.

59) Break-even analysis assumes that:

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A) Total revenue is constant.

B) Unit variable expense is constant.

C) Unit fixed expense is constant.

D) Selling prices must fall in order to generate more revenue.

60) Which of the following would not affect the break-even point?

A) number of units sold

B) variable expense per unit

C) total fixed expense

D) selling price per unit

61) A $2.00 increase in a product’s variable expense per unit accompanied by a $2.00

increase in its selling price per unit will:

A) decrease the degree of operating leverage.

B) decrease the contribution margin.

C) have no effect on the break-even volume.

D) have no effect on the contribution margin ratio.

62) 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

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63) If sales volume increases and all other factors remain constant, then the:

A) contribution margin ratio will increase.

B) break-even point will decrease.

C) margin of safety will increase.

D) net operating income will decrease.

64) If the degree of operating leverage is 4, then a one percent change in quantity sold should

result in a four percent change in:

A) unit contribution margin.

B) revenue.

C) variable expense.

D) net operating income.

65) Which of the following is an assumption underlying standard CVP analysis?

A) In multiproduct companies, the sales mix is constant.

B) In manufacturing companies, inventories always change.

C) The price of a product or service is expected to change as volume changes.

D) Fixed expenses will change as volume increases.

66) Rovinsky Corporation, a company that produces and sells a single product, has provided

its contribution format income statement for November.

Sales (6,600 units) $429,000

Variable expenses 297,000

Contribution margin 132,000

Fixed expenses 103,500

Net operating income $28,500

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If the company sells 6,500 units, its net operating income should be closest to: (Do not round

intermediate calculations.)

A) $27,979

B) $26,500

C) $28,500

D) $24,000

67) Rovinsky Corporation, a company that produces and sells a single product, has provided

its contribution format income statement for November.

Sales (5,700 units) $319,200

Variable expenses 188,100

Contribution margin 131,100

Fixed expenses 106,500

Net operating income $24,600

If the company sells 5,300 units, its net operating income should be closest to:

A) $24,600

B) $2,200

C) $22,874

D) $15,400

68) Sorin Incorporated, a company that produces and sells a single product, has provided its

contribution format income statement for January.

Sales (4,800 units) $100,800

Variable expenses 55,440

Contribution margin 45,360

Fixed expenses 34,500

Net operating income $10,860

If the company sells 5,200 units, its total contribution margin should be closest to: (Do not

round intermediate calculations.)

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A) $45,360

B) $49,140

C) $68,500

D) $11,765

69) Sorin Incorporated, a company that produces and sells a single product, has provided its

contribution format income statement for January.

Sales (4,200 units) $155,400

Variable expenses 100,800

Contribution margin 54,600

Fixed expenses 42,400

Net operating income $12,200

If the company sells 4,600 units, its total contribution margin should be closest to:

A) $54,600

B) $59,800

C) $69,400

D) $13,362

70) Schister Systems uses the following data in its Cost-Volume-Profit analyses:

Total

Sales $390,000

Variable expenses 214,500

Contribution margin 175,500

Fixed expenses 118,000

Net operating income $57,500

What is total contribution margin if sales volume increases by 40%?

A) $175,500

B) $80,500

C) $245,700

D) $34,500

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71) Schister Systems uses the following data in its Cost-Volume-Profit analyses:

Total

Sales $400,000

Variable expenses 280,000

Contribution margin 120,000

Fixed expenses 100,000

Net operating income $20,000

What is total contribution margin if sales volume increases by 20%?

A) $80,000

B) $158,400

C) $200,000

D) $144,000

72) Kelchner Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $180,000

Variable expenses 108,000

Contribution margin 72,000

Fixed expenses 62,400

Net operating income $9,600

The contribution margin ratio is closest to:

A) 67%

B) 40%

C) 33%

D) 60%

73) Nocum Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $120,000

Variable expenses 90,000

Contribution margin 30,000

Fixed expenses 21,000

Net operating income $9,000

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

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A) $29,000

B) $1,000

C) $8,700

D) $8,000

74) Stauffer Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (8,000 units) $320,000

Variable expenses 192,000

Contribution margin 128,000

Fixed expenses 118,400

Net operating income $9,600

The variable expense ratio is closest to:

A) 60%

B) 40%

C) 67%

D) 33%

75) Carver Corporation produces a product which sells for $40. Variable manufacturing costs

are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of sales

volume, and fixed selling and administrative costs are $4 per unit. A selling commission of 15%

of the selling price is paid on each unit sold. The contribution margin per unit is:

A) $7

B) $17

C) $22

D) $16

76) Coultrap Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $180,000

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Variable expenses 117,000

Contribution margin 63,000

Fixed expenses 48,300

Net operating income $14,700

The contribution margin per unit is closest to:

A) $21.00

B) $60.00

C) $39.00

D) $4.90

77) Escareno Corporation has provided its contribution format income statement for June.

The company produces and sells a single product.

Sales (8,400 units) $764,400

Variable expenses 445,200

Contribution margin 319,200

Fixed expenses 250,900

Net operating income $68,300

If the company sells 8,200 units, its total contribution margin should be closest to:

A) $301,000

B) $311,600

C) $319,200

D) $66,674

78) Decaprio Incorporated produces and sells a single product. The company has provided its

contribution format income statement for June.

Sales (7,200 units) $324,000

Variable expenses 201,600

Contribution margin 122,400

Fixed expenses 87,500

Net operating income $34,900

If the company sells 7,400 units, its net operating income should be closest to: (Do not round

intermediate calculations.)

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A) $38,300

B) $34,900

C) $43,900

D) $35,869

79) Decaprio Incorporated produces and sells a single product. The company has provided its

contribution format income statement for June.

Sales (8,800 units) $528,000

Variable expenses 290,400

Contribution margin 237,600

Fixed expenses 211,700

Net operating income $25,900

If the company sells 9,200 units, its net operating income should be closest to:

A) $27,077

B) $49,900

C) $36,700

D) $25,900

80) Warrix Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $120,000

Variable expenses 90,000

Contribution margin 30,000

Fixed expenses 27,000

Net operating income $3,000

If salesvolumes increase to 3,020 units, the increase in net operating income would be closest to:

A) $800.00

B) $20.00

C) $600.00

D) $200.00

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81) Thomason Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (1,000 units) $40,000

Variable expenses 30,000

Contribution margin 10,000

Fixed expenses 7,000

Net operating income $3,000

If the variable cost per unit increases by $1, spending on advertising increases by $2,000, and

unit sales increase by 50 units, the net operating income would be closest to:

A) $450

B) $1,000

C) $2,150

D) $9,450

82) Duve Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (2,000 units) $40,000

Variable expenses 24,000

Contribution margin 16,000

Fixed expenses 11,200

Net operating income $4,800

If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net

operating income would be closest to:

A) $7,200

B) $12,800

C) $10,400

D) $11,520

83) Ploeger Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (4,000 units) $240,000

Variable expenses 156,000

Contribution margin 84,000

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Fixed expenses 81,900

Net operating income $2,100

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

A) $234,000

B) $237,900

C) $156,000

D) $0

84) The following information pertains to Nova Company’s cost-volume-profit relationships:

Breakeven point in units sold 1,000

Variable expenses per unit $500

Total fixed expenses $150,000

How much will be contributed to net operating income by the 1,001st unit sold?

A) $650

B) $500

C) $150

D) $0

85) Mishoe Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (1,000 units) $50,000

Variable expenses 32,500

Contribution margin 17,500

Fixed expenses 12,250

Net operating income $5,250

The break-even point in unit sales is closest to: (Round your intermediate calculations to 2

decimal places.)

A) 0 units

B) 895 units

C) 700 units

D) 650 units

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86) Stockmaster Corporation has provided the following contribution format income

statement. Assume that the following information is within the relevant range.

Sales (8,000 units) $320,000

Variable expenses 192,000

Contribution margin 128,000

Fixed expenses 121,600

Net operating income $6,400

The margin of safety in dollars is closest to:

A) $6,400

B) $16,000

C) $121,600

D) $128,000

87) Hedman Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $270,000

Variable expenses 202,500

Contribution margin 67,500

Fixed expenses 63,750

Net operating income $3,750

The margin of safety percentage is closest to:

A) 75%

B) 1%

C) 6%

D) 24%

88) Cassius Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (7,000 units) $210,000

Variable expenses 136,500

Contribution margin 73,500

Fixed expenses 67,200

Net operating income $6,300

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The number of units that must be sold to achieve a target profit of $31,500 is closest to:

A) 42,000 units

B) 16,400 units

C) 35,000 units

D) 9,400 units

89) Goodman Corporation has sales volumes of 3,000 units at $80 per unit. Variable costs are

35% of the sales price. If total fixed costs are $66,000, the degree of operating leverage is:

A) 0.79

B) 0.93

C) 2.67

D) 1.73

90) Jilk Incorporated’s contribution margin ratio is 64% and its fixed monthly expenses are

$44,500. 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 $131,000?

A) $83,840

B) $2,660

C) $39,340

D) $86,500

91) Jilk Incorporated’s contribution margin ratio is 58% and its fixed monthly expenses are

$36,000. 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 $103,000?

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A) $23,740

B) $59,740

C) $67,000

D) $7,260

92) Gayne Corporation’s contribution margin ratio is 18% and its fixed monthly expenses are

$52,000. If the company’s sales for a month are $315,000, what is the best estimate of the

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

A) $206,300

B) $4,700

C) $263,000

D) $56,700

93) Gayne Corporation’s contribution margin ratio is 12% and its fixed monthly expenses are

$84,000. If the company’s sales for a month are $738,000, what is the best estimate of the

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

A) $565,440

B) $654,000

C) $88,560

D) $4,560

94) Creswell Corporation’s fixed monthly expenses are $29,500 and its contribution margin

ratio is 62%. 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 $91,000?

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A) $5,080

B) $56,420

C) $26,920

D) $61,500

95) Creswell Corporation’s fixed monthly expenses are $29,000 and its contribution margin

ratio is 56%. 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 $95,000?

A) $12,800

B) $24,200

C) $53,200

D) $66,000

96) Northern Pacific Fixtures Corporation sells a single product for $28 per unit. If variable

expenses are 65% of sales and fixed expenses total $9,800, the break-even point is: (Round your

intermediate calculations to 2 decimal places.)

A) $15,077

B) $18,200

C) $9,800

D) $28,000

97) Variable expenses for Alpha Corporation are 40% of sales. What are sales at the break-

even point, assuming that fixed expenses total $150,000 per year:

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A) $250,000

B) $375,000

C) $600,000

D) $150,000

98) Moyas Corporation sells a single product for $10 per unit. Last year, the company’s sales

revenue was $240,000 and its net operating income was $16,000. If fixed expenses totaled

$80,000 for the year, the break-even point in unit sales was:

A) 24,000 units

B) 14,400 units

C) 25,600 units

D) 20,000 units

99) Moyas Corporation sells a single product for $20 per unit. Last year, the company’s sales

revenue was $300,000 and its net operating income was $24,000. If fixed expenses totaled

$96,000 for the year, the break-even point in unit sales was:

A) 12,000 units

B) 9,900 units

C) 15,000 units

D) 14,100 units

100) Sabv Corporation’s break-even-point in sales is $860,000, and its variable expenses are

70% of sales. If the company lost $36,000 last year, sales must have amounted to:

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A) $824,000

B) $788,000

C) $740,000

D) $566,000

101) Sabv Corporation’s break-even-point in sales is $675,000, and its variable expenses are

75% of sales. If the company lost $24,000 last year, sales must have amounted to:

A) $651,000

B) $579,000

C) $603,000

D) $471,000

102) Last year Easton Corporation reported sales of $890,000, a contribution margin ratio of

40% and a net loss of $41,000. Based on this information, the break-even point was:

A) $787,500

B) $1,095,000

C) $931,000

D) $992,500

103) Last year Easton Corporation reported sales of $480,000, a contribution margin ratio of

25% and a net loss of $16,000. Based on this information, the break-even point was:

A) $435,000

B) $544,000

C) $506,000

D) $600,000

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104) Black Corporation’s sales are $600,000, its fixed expenses are $150,000, and its variable

expenses are 60% of sales. The margin of safety is:

A) $90,000

B) $190,000

C) $225,000

D) $240,000

105) Awtis Corporation has a margin of safety percentage of 20% based on its actual sales.

The break-even point is $200,000 and the variable expenses are 45% of sales. Given this

information, the actual profit is:

A) $62,500

B) $27,500

C) $2,500

D) $22,000

106) Awtis Corporation has a margin of safety percentage of 20% based on its actual sales.

The break-even point is $500,000 and the variable expenses are 60% of sales. Given this

information, the actual profit is:

A) $65,000

B) $55,000

C) $50,000

D) $41,500

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107) Tropp Corporation sells a product for $10 per unit. The fixed expenses are $420,000 per

month and the unit variable expenses are 60% of the selling price. What sales would be

necessary in order for Tropp to realize a profit of 10% of sales? (Round your intermediate

calculations to 2 decimal places.)

A) $1,050,000

B) $945,000

C) $1,400,000

D) $840,000

108) Hopi Corporation expects the following operating results for next year:

Sales $400,000

Margin of safety $100,000

Contribution margin ratio 75%

Degree of operating leverage 4

What is Hopi expecting total fixed expenses to be next year?

A) $75,000

B) $100,000

C) $200,000

D) $225,000

109) Iverson Corporation’s variable expenses are 60% of sales. At a $400,000 sales level, the

degree of operating leverage is 5. If sales increase by $40,000, the new degree of operating

leverage will be (rounded):

A) 3.67

B) 2.86

C) 5.25

D) 5.00

110) Data concerning Dorazio Corporation’s single product appear below:

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Per Unit Percent of Sales

Selling price $160 100%

Variable expenses 48 30%

Contribution margin $112 70%

Fixed expenses are $87,000 per month. The company is currently selling 1,000 units per month.

Management is considering using a new component that would increase the unit variable cost by

$28. Since the new component would increase the features of the company’s product, the

marketing manager predicts that monthly sales would increase by 400 units. What should be the

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

A) increase of $5,600

B) increase of $33,600

C) decrease of $5,600

D) decrease of $33,600

111) Kuzio Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $160 100%

Variable expenses 96 60%

Contribution margin $64 40%

The company is currently selling 5,900 units per month. Fixed expenses are $198,000 per month.

The marketing manager believes that a $5,600 increase in the monthly advertising budget would

result in a 130 unit increase in monthly sales. What should be the overall effect on the company’s

monthly net operating income of this change?

A) increase of $2,720

B) increase of $8,320

C) decrease of $5,600

D) decrease of $2,720

112) Kuzio Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $130 100%

Variable expenses 78 60%

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Contribution margin $52 40%

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 volume. What should be the overall effect on the

company’s monthly net operating income of this change?

A) increase of $2,280

B) increase of $7,280

C) decrease of $5,000

D) decrease of $2,280

113) Data concerning Pellegren Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $200 100%

Variable expenses 40 20%

Contribution margin $160 80%

Fixed expenses are $531,000 per month. The company is currently selling 4,000 units per month.

The marketing manager would like to cut the selling price by $14 and increase the advertising

budget by $35,000 per month. The marketing manager predicts that these two changes would

increase monthly salesvolume by 500 units. What should be the overall effect on the company’s

monthly net operating income of this change?

A) decrease of $18,000

B) increase of $38,000

C) decrease of $38,000

D) increase of $58,000

114) Warbler Gift’s reported the following information for the sales of their single product:

Total Per Unit

Sales $300,000 $10

Variable expenses 180,000 6

Contribution margin 120,000 $4

Fixed expenses 100,000

Net operating income $20,000

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Warbler’s salesmen have proposed to decrease the selling price by 50 cents per unit. How many

units will need to be sold for Warbler to earn at least the same net operating income? (Round

your intermediate calculations to 2 decimal places.)

A) 5,715 units

B) 36,000 units

C) 34,286 units

D) 28,572 units

115) Data concerning Bazin Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $100 100%

Variable expenses 20 20%

Contribution margin $80 80%

Fixed expenses are $384,000 per month. The company is currently selling 6,000 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 $46,000 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 500 units. What should be the overall effect on the

company’s monthly net operating income of this change?

A) increase of $27,500

B) decrease of $64,500

C) increase of $41,500

D) increase of $507,500

116) Chovanec Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $170 100%

Variable expenses 68 40%

Contribution margin $102 60%

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Fixed expenses are $521,000 per month. The company is currently selling 7,000 units per month.

Management is considering using a new component that would increase the unit variable cost by

$6. 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?

A) decrease of $48,000

B) decrease of $6,000

C) increase of $48,000

D) increase of $6,000

117) How much will a company’s net operating income change if it undertakes an advertising

campaign given the following data:

Cost of advertising campaign $25,000

Variable expense as a percentage of sales 42%

Increase in sales $60,000

A) $200 increase

B) $25,200 increase

C) $15,000 increase

D) $9,800 increase

118) Data concerning Kardas Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $140 100%

Variable expenses 28 20%

Contribution margin $112 80%

The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month.

The marketing manager believes that a $20,000 increase in the monthly advertising budget

would result in a 180 unit increase in monthly sales. What should be the overall effect on the

company’s monthly net operating income of this change?

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A) decrease of $160

B) increase of $20,160

C) decrease of $20,000

D) increase of $160

119) Cobble Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $160 100%

Variable expenses 48 30%

Contribution margin $112 70%

Fixed expenses are $499,000 per month. The company is currently selling 5,000 units per month.

The marketing manager would like to cut the selling price by $13 and increase the advertising

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

increase monthly sales by 900 units. What should be the overall effect on the company’s monthly

net operating income of this change?

A) increase of $56,100

B) decrease of $8,900

C) increase of $99,300

D) decrease of $56,100

120) Sannella Corporation produces and sells a single product. Data concerning that product

appear below:

Per Unit Percent of Sales

Selling price $220 100%

Variable expenses 66 30%

Contribution margin $154 70%

Fixed expenses are $991,000 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 $11 per unit. In exchange, the sales

staff would accept a decrease in their salaries of $74,000 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 200 units. What should be the overall effect on the

company’s monthly net operating income of this change?

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A) increase of $1,246,600

B) increase of $14,600

C) decrease of $133,400

D) increase of $71,800

121) Wenstrom Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $130.00

Variable expense per unit $41.60

Fixed expense per month $109,616

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) $342,550

B) $204,455

C) $109,616

D) $161,200

122) Borich Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $150.00

Variable expense per unit $73.50

Fixed expense per month $308,295

The break-even in monthly unit sales is closest to: (Round your intermediate calculations to 2

decimal places.)

A) 2,055

B) 4,030

C) 4,194

D) 3,426

123) Data concerning Follick Corporation’s single product appear below:

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Selling price per unit $160.00

Variable expense per unit $64.00

Fixed expense per month $124,800

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) $208,000

B) $291,200

C) $124,800

D) $416,000

124) Data concerning Follick Corporation’s single product appear below:

Selling price per unit $110.00

Variable expense per unit $30.80

Fixed expense per month $321,552

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) $1,148,400

B) $638,851

C) $321,552

D) $446,600

125) Wimpy Incorporated produces and sells a single product. The selling price of the product

is $235.00 per unit and its variable cost is $86.95 per unit. The fixed expense is $373,653 per

month.

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations

to 2 decimal places.)

A) $1,009,873

B) $636,220

C) $593,100

D) $373,653

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126) Wimpy Incorporated produces and sells a single product. The selling price of the product

is $150.00 per unit and its variable cost is $58.50 per unit. The fixed expense is $366,915 per

month.

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations

to 2 decimal places.)

A) $601,500

B) $366,915

C) $636,408

D) $940,808

127) Given the following data:

Selling price per unit $2.00

Variable production cost per unit $0.30

Fixed production cost $3,000

Sales commission per unit $0.20

Fixed selling expenses $1,500

The break-even point in dollars is: (Round your intermediate calculations to 2 decimal

places.)

A) $6,000

B) $4,500

C) $2,647

D) $4,000

128) Hevesy Incorporated 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:

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A) 2,500

B) 1,500

C) 3,750

D) 2,583

129) Singapore Candy Cane Corporation is a single product firm with the following cost

structure for next year:

Selling price per unit $1.20

Variable expenses per unit $0.72

Total fixed expenses for the year $64,800

What is the company’s break-even point next year in sales dollars? (Round your intermediate

calculations to 2 decimal places.)

A) $90,000

B) $108,000

C) $135,000

D) $162,000

130) Bear Publishing sells a nature guide. The following information was reported for a typical

month:

Total Per Unit

Sales $17,600 $16.00

Variable expenses 9,680

Contribution margin 7,920

Fixed expenses 3,600

Net operating income $4,320

What is Bear’s current break-even point in unit and dollars? (Round your intermediate

calculations to 2 decimal places.)

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A) 1,100 units and $17,600

B) 1,100 units and $8,000

C) 8,000 units and $500

D) 500 units and $8,000

131) 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:

A) 10,500 units

B) 4,500 units

C) 8,500 units

D) 9,000 units

132) Derst Incorporated sells a particular textbook for $22. Variable expenses are $13 per

book. At the current volume of 51,000 books sold per year the company is just breaking even.

Given these data, the annual fixed expenses associated with the textbook total:

A) $459,000

B) $1,122,000

C) $1,581,000

D) $663,000

133) Derst Incorporated sells a particular textbook for $140. Variable expenses are $25 per

book. At the current volume of 6,000 books sold per year the company is just breaking even.

Given these data, the annual fixed expenses associated with the textbook total:

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A) $400,000

B) $690,000

C) $840,000

D) $150,000

134) Data concerning Buchenau Corporation’s single product appear below:

Selling price per unit $150.00

Variable expense per unit $34.50

Fixed expense per month $466,620

The break-even in monthly unit sales is closest to: (Round your intermediate calculations to 2

decimal places.)

A) 3,111

B) 6,892

C) 4,040

D) 13,525

135) Sufra Corporation is planning to sell 100,000 units for $2.10 per unit and will break even

at this level of sales. Fixed expenses will be $80,000. What are the company’s variable expenses

per unit?

A) $0.80

B) $1.68

C) $1.30

D) $0.50

136) Sufra Corporation is planning to sell 100,000 units for $8.00 per unit and will break even

at this level of sales. Fixed expenses will be $300,000. What are the company’s variable expenses

per unit?

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A) $5.00

B) $4.00

C) $3.00

D) $4.50

137) Mio Canoe Livery rents canoes and transports canoes and customers to and from their

canoe trip on a local river. The trip is priced at $20 per person and has a CM ratio of 30%. Mio’s

fixed expenses are $84,000. Last year, sales were $400,000 and profit was $36,000. How many

units need to be sold to break-even, and how many need to be sold to earn a profit of $42,000?

A) 1,800 and 2,100

B) 6,000 and 8,143

C) 14,000 and 21,000

D) 4,200 and 6,300

138) A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800

per month and the product has a contribution margin ratio of 40%. If the company’s actual sales

are $224,000, its margin of safety is:

A) $32,000

B) $96,000

C) $128,000

D) $192,000

139) The following data are available for the Phelps Corporation for a recent month:

Product A Product B Product C Total

Sales $150,000 $130,000 $90,000 $370,000

Variable expenses 91,000 104,000 27,000 222,000

Contribution margin $59,000 $26,000 $63,000 148,000

Fixed expenses 55,000

Net operating income $93,000

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The break-even sales for the month for the company is closest to:

A) $91,667

B) $203,000

C) $148,000

D) $137,500

140) Ferkil Corporation manufacturers a single product that has a selling price of $40.00 per

unit. Fixed expenses total $75,000 per year, and the company must sell 7,500 units to break even.

If the company has a target profit of $16,000, sales in units must be:

A) 8,418 units

B) 7,900 units

C) 9,100 units

D) 9,375 units

141) Ferkil Corporation manufacturers a single product that has a selling price of $100 per

unit. Fixed expenses total $225,000 per year, and the company must sell 5,000 units to break

even. If the company has a target profit of $67,500, sales in units must be:

A) 6,000 units

B) 5,750 units

C) 7,925 units

D) 6,500 units

142) Corporation X sold 25,000 units of product last year. The contribution margin per unit

was $2, and fixed expenses totaled $40,000 for the year. This year fixed expenses are expected to

increase to $45,000, but the contribution margin per unit will remain unchanged at $2. How

many units must be sold this year to earn the same net operating income as was earned last year?

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A) 22,500

B) 27,500

C) 35,000

D) 2,500

143) Data concerning Bedwell Enterprises Corporation’s single product appear below:

Selling price per unit $155.00

Variable expense per unit $91.00

Fixed expense per month $427,940

The unit sales to attain the company’s monthly target profit of $18,000 is closest to: (Do not

round intermediate calculations.)

A) 6,687

B) 2,877

C) 4,900

D) 6,968

144) Data concerning Bedwell Enterprises Corporation’s single product appear below:

Selling price per unit $160.00

Variable expense per unit $65.60

Fixed expense per month $387,040

The unit sales to attain the company’s monthly target profit of $17,000 is closest to: (Round

your intermediate calculations to 2 decimal places.)

A) 6,159

B) 4,280

C) 2,525

D) 4,321

145) The contribution margin ratio of Mountain Corporation’s only product is 52%. The

company’s monthly fixed expense is $296,400 and the company’s monthly target profit is $7,000.

The dollar sales to attain that target profit is closest to:

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A) $570,000

B) $157,768

C) $583,462

D) $154,128

146) Hettrick International Corporation’s only product sells for $120.00 per unit and its

variable expense is $52.80. The company’s monthly fixed expense is $396,480 per month. The

unit sales to attain the company’s monthly target profit of $13,000 is closest to: (Round your

intermediate calculations to 2 decimal places.)

A) 7,755

B) 6,093

C) 5,753

D) 3,412

147) Caneer Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $240.00

Variable expense per unit $81.60

Fixed expense per month $997,920

The unit sales to attain the company’s monthly target profit of $44,000 is closest to: (Round

your intermediate calculations to 2 decimal places.)

A) 7,896

B) 12,769

C) 6,578

D) 4,341

148) Product Y sells for $15 per unit, and has variable expenses of $9 per unit. Fixed expenses

total $300,000 per year. How many units of Product Y must be sold each year to yield an annual

profit of $90,000?

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A) 50,000 units

B) 65,000 units

C) 15,000 units

D) 43,333 units

149) Logsdon Corporation produces and sells a single product whose contribution margin ratio

is 63%. The company’s monthly fixed expense is $720,720 and the company’s monthly target

profit is $28,000. The dollar sales to attain that target profit is closest to:

A) $471,694

B) $454,054

C) $1,188,444

D) $1,144,000

150) Mcmurtry Corporation sells a product for $280 per unit. The product’s current sales are

13,900 units and its break-even sales are 10,425 units. The margin of safety as a percentage of

sales is closest to:

A) 25%

B) 33%

C) 75%

D) 67%

151) 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:

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A) 23%

B) 81%

C) 19%

D) 77%

152) Cubie Corporation has provided the following data concerning its only product:

Selling price $97 per unit

Current sales 10,300 units

Break-even sales 8,961 units

What is the margin of safety in dollars?

A) $999,100

B) $129,883

C) $869,217

D) $756,219

153) 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

154) 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:

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A) 61%

B) 28%

C) 72%

D) 39%

155) 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%

156) Majid Corporation sells a product for $130 per unit. The product’s current sales are

41,000 units and its break-even sales are 31,860 units.

What is the margin of safety in dollars?

A) $3,218,482

B) $5,330,000

C) $4,141,800

D) $1,188,200

157) 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?

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A) $8,821,680

B) $6,608,000

C) $9,912,000

D) $1,090,320

158) Rushenberg Corporation’s operating leverage is 10.8. If the company’s salesvolume

increases by 14%, its net operating income should increase by about:

A) 151.2%

B) 14.0%

C) 77.1%

D) 10.8%

159) 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

160) 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:

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A) 15

B) 2.7

C) 30

D) 12

161) 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

162) Bendel Incorporated has an operating leverage of 3.8. If the company’s sales increase by

10%, its net operating income should increase by about:

A) 38.0%

B) 2.6%

C) 10.0%

D) 26.4%

163) Bendel Incorporated has an operating leverage of 7.3. If the company’s salesvolume

increases by 3%, its net operating income should increase by about:

A) 243.3%

B) 7.3%

C) 21.9%

D) 3.0%

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164) Alpha Corporation reported the following data for its most recent year: sales, $680,000;

variable expenses, $340,000; and fixed expenses, $272,000. The company’s degree of operating

leverage is closest to:

A) 10.00

B) 1.00

C) 5.00

D) 2.00

165) 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

166) 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 salesvolume is closest to: (Round your intermediate

calculations to 1 decimal place.)

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A) 1.13%

B) 88.89%

C) 22.22%

D) 4.50%

167) Serfass Corporation’s contribution format income statement for July appears below:

Sales $254,400

Variable expenses 127,200

Contribution margin 127,200

Fixed expenses 35,620

Net operating income $91,580

The degree of operating leverage is closest to:

A) 0.36

B) 0.72

C) 2.00

D) 1.39

168) 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

169) Bristo Corporation has sales of 1,500 units at $60 per unit. Variable expenses are 30% of

the selling price. If total fixed expenses are $53,000, the degree of operating leverage is:

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A) 2.70

B) 9.00

C) 2.87

D) 6.30

170) 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

171) 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

172) 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:

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A) $196,000

B) $200,000

C) $252,632

D) $263,420

173) 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.

174) 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%

175) Mcdale Incorporated produces and sells two products. Data concerning those products for

the most recent month appear below:

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Product I49V Product Z50U

Sales $47,000 $52,000

Variable expenses $13,500 $28,080

The fixed expenses of the entire company were $39,010. The break-even point for the entire

company is closest to:

A) $80,590

B) $67,259

C) $39,010

D) $46,130

176) Mcdale Incorporated 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

177) 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?

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A) $72,000

B) $144,000

C) $192,000

D) $240,000

178) Flesch Corporation produces and sells two products. In the most recent month, Product

C90B had sales of $19,360 and variable expenses of $5,808. Product Y45E had sales of $17,600

and variable expenses of $7,920. The fixed expenses of the entire company were $17,600. 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.

179) 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.

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180) Newham Corporation produces and sells two products. In the most recent month, Product

R10L had sales of $36,000 and variable expenses of $11,280. Product X96N had sales of

$49,000 and variable expenses of $17,620. The fixed expenses of the entire company were

$46,110. The break-even point for the entire company is closest to:

A) $56,100

B) $75,010

C) $69,864

D) $46,110

181) 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

182) 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

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183) 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 4,200 units, its net operating income should be closest to:

A) $17,600

B) $23,009

C) $25,200

D) $2,000

184) Wight Corporation has provided its contribution format income statement for June. The

company produces and sells a single product.

Sales (4,200 units) $ 138,600

Variable expenses 58,800

Contribution margin 79,800

Fixed expenses 44,400

Net operating income $ 35,400

If the company sells 4,300 units, its total contribution margin should be closest to: (Do not

round intermediate calculations.)

A) $36,243

B) $79,800

C) $81,700

D) $83,100

185) Wight Corporation has provided its contribution format income statement for June. The

company produces and sells a single product.

Sales (9,600 units) $ 336,000

Variable expenses 144,000

Contribution margin 192,000

Fixed expenses 137,000

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Net operating income $ 55,000

If the company sells 9,100 units, its total contribution margin should be closest to:

A) $174,500

B) $192,000

C) $52,135

D) $182,000

186) Wight Corporation has provided its contribution format income statement for June. The

company produces and sells a single product.

Sales (9,600 units) $ 336,000

Variable expenses 144,000

Contribution margin 192,000

Fixed expenses 137,000

Net operating income $ 55,000

If the company sells 9,700 units, its net operating income should be closest to:

A) $57,000

B) $55,000

C) $55,573

D) $58,500

187) Lister Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $ 90,000

Variable expenses 58,500

Contribution margin 31,500

Fixed expenses 21,000

Net operating income $ 10,500

If sales increase to 3,040 units, the increase in net operating income would be closest to: (Round

your intermediate calculations to 2 decimal places.)

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A) $420.00

B) $140.00

C) $1,200.00

D) $780.00

188) Lister Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $ 90,000

Variable expenses 58,500

Contribution margin 31,500

Fixed expenses 21,000

Net operating income $ 10,500

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

intermediate calculations to 2 decimal places.)

A) $1,050

B) $30,450

C) $10,150

D) $9,450

189) Souza Incorporated, which produces and sells a single product, has provided its

contribution format income statement for October.

Sales (4,000 units) $ 88,000

Variable expenses 40,000

Contribution margin 48,000

Fixed expenses 41,700

Net operating income $ 6,300

If the company sells 3,600 units, its total contribution margin should be closest to:

A) $39,200

B) $5,670

C) $43,200

D) $48,000

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190) Souza Incorporated, which produces and sells a single product, has provided its

contribution format income statement for October.

Sales (4,000 units) $ 88,000

Variable expenses 40,000

Contribution margin 48,000

Fixed expenses 41,700

Net operating income $ 6,300

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

A) $5,513

B) $6,300

C) $300

D) -$4,700

191) Kelsay Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 540,000

Variable expenses 405,000

Contribution margin 135,000

Fixed expenses 130,500

Net operating income $ 4,500

The contribution margin per unit is closest to:

A) $15.00

B) $0.50

C) $45.00

D) $60.00

192) Kelsay Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 540,000

Variable expenses 405,000

Contribution margin 135,000

Fixed expenses 130,500

Net operating income $ 4,500

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The contribution margin ratio is closest to:

A) 75%

B) 67%

C) 25%

D) 33%

193) Kelsay Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 540,000

Variable expenses 405,000

Contribution margin 135,000

Fixed expenses 130,500

Net operating income $ 4,500

The variable expense ratio is closest to:

A) 33%

B) 67%

C) 25%

D) 75%

194) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 264,000

Sales revenue $ 1,082,400

Variable manufacturing expense $ 433,000

Fixed manufacturing expense $ 230,000

Variable selling and administrative expense $ 95,000

Fixed selling and administrative expense $ 220,000

Net operating income $ 104,400

What is the company’s unit contribution margin? (Round your intermediate calculations to 2

decimal places.)

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A) $2.00 per unit

B) $0.12 per unit

C) $4.10 per unit

D) $2.10 per unit

195) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 680,000

Sales revenue $ 2,788,000

Variable manufacturing expense $ 1,156,000

Fixed manufacturing expense $ 760,000

Variable selling and administrative expense $ 272,000

Fixed selling and administrative expense $ 294,000

Net operating income $ 306,000

What is the company’s unit contribution margin? (Round your intermediate calculations to 2

decimal places.)

A) $0.45 per unit

B) $2.10 per unit

C) $2.00 per unit

D) $4.10 per unit

196) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 235,000

Sales revenue $ 939,000

Variable manufacturing expense $ 255,000

Fixed manufacturing expense $ 289,000

Variable selling and administrative expense $ 120,600

Fixed selling and administrative expense $ 85,000

Net operating income $ 189,400

The company’s contribution margin ratio is closest to:

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A) 42.1%

B) 60.0%

C) 69.2%

D) 20.2%

197) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 680,000

Sales revenue $ 2,788,000

Variable manufacturing expense $ 1,156,000

Fixed manufacturing expense $ 760,000

Variable selling and administrative expense $ 272,000

Fixed selling and administrative expense $ 294,000

Net operating income $ 306,000

The company’s contribution margin ratio is closest to:

A) 39.0%

B) 51.2%

C) 11.0%

D) 48.8%

198) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 680,000

Sales revenue $ 2,788,000

Variable manufacturing expense $ 1,156,000

Fixed manufacturing expense $ 760,000

Variable selling and administrative expense $ 272,000

Fixed selling and administrative expense $ 294,000

Net operating income $ 306,000

If the company increases its unit sales volume by 4% without increasing its fixed expenses, then

total net operating income should be closest to: (Round your intermediate calculations to 2

decimal places.)

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A) $12,240

B) $318,240

C) $360,400

D) $311,973

199) A tile manufacturer has supplied the following data:

Boxes of tiles produced and sold 520,000

Sales revenue $ 2,132,000

Variable manufacturing expense $ 650,000

Fixed manufacturing expense $ 464,000

Variable selling and administrative expense $ 260,000

Fixed selling and administrative expense $ 312,000

Net operating income $ 446,000

What is the company’s unit contribution margin? (Round your intermediate calculations to 2

decimal places.)

A) $0.86 per unit

B) $2.35 per unit

C) $4.10 per unit

D) $1.75 per unit

200) A tile manufacturer has supplied the following data:

Boxes of tiles produced and sold 520,000

Sales revenue $ 2,132,000

Variable manufacturing expense $ 650,000

Fixed manufacturing expense $ 464,000

Variable selling and administrative expense $ 260,000

Fixed selling and administrative expense $ 312,000

Net operating income $ 446,000

The company’s contribution margin ratio is closest to:

A) 42.7%

B) 57.3%

C) 45.8%

D) 21.0%

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201) A tile manufacturer has supplied the following data:

Boxes of tiles produced and sold 520,000

Sales revenue $ 2,132,000

Variable manufacturing expense $ 650,000

Fixed manufacturing expense $ 464,000

Variable selling and administrative expense $ 260,000

Fixed selling and administrative expense $ 312,000

Net operating income $ 446,000

If the company increases its unit sales volume by 3% without increasing its fixed expenses, then

total net operating income should be closest to: (Round your intermediate calculations to 2

decimal places.)

A) $459,380

B) $453,667

C) $13,380

D) $482,660

202) Sjostrom 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 182,000

Contribution margin 98,000

Fixed expenses 84,000

Net operating income $ 14,000

If the selling price increases by $3 per unit and the sales volume decreases by 600 units, the net

operating income would be closest to:

A) $24,800

B) $35,000

C) $19,200

D) $32,000

203) Sjostrom 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

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Variable expenses 182,000

Contribution margin 98,000

Fixed expenses 84,000

Net operating income $ 14,000

If the variable cost per unit increases by $10, spending on advertising increases by $1,500, and

unit sales increase by 15,800 units, the net operating income would be closest to:

A) $12,500

B) $114,100

C) $91,200

D) $5,700

204) Remmel Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (6,000 units) $ 300,000

Variable expenses 240,000

Contribution margin 60,000

Fixed expenses 59,000

Net operating income $ 1,000

If sales increase to 6,020 units, the increase in net operating income would be closest to:

A) $1,000.00

B) $800.00

C) $200.00

D) $3.33

205) Remmel Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (6,000 units) $ 300,000

Variable expenses 240,000

Contribution margin 60,000

Fixed expenses 59,000

Net operating income $ 1,000

If the selling price increases by $3 per unit and the sales volume decreases by 400 units, the net

operating income would be closest to:

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A) $19,000

B) $16,800

C) $13,800

D) $17,733

206) Valdez Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (6,000 units) $ 240,000

Variable expenses 180,000

Contribution margin 60,000

Fixed expenses 54,000

Net operating income $ 6,000

The break-even point in unit sales is closest to:

A) 5,850 units

B) 4,500 units

C) 0 units

D) 5,400 units

207) Valdez Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (6,000 units) $ 240,000

Variable expenses 180,000

Contribution margin 60,000

Fixed expenses 54,000

Net operating income $ 6,000

The number of units that must be sold to achieve a target profit of $24,000 is closest to:

A) 30,000 units

B) 7,800 units

C) 13,800 units

D) 24,000 units

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208) Nussbaum Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 180,000

Variable expenses 117,000

Contribution margin 63,000

Fixed expenses 56,700

Net operating income $ 6,300

The break-even point in unit sales is closest to:

A) 0 units

B) 5,850 units

C) 8,100 units

D) 8,685 units

209) Nussbaum Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 180,000

Variable expenses 117,000

Contribution margin 63,000

Fixed expenses 56,700

Net operating income $ 6,300

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

A) $162,000

B) $117,000

C) $0

D) $173,700

210) Nussbaum Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 180,000

Variable expenses 117,000

Contribution margin 63,000

Fixed expenses 56,700

Net operating income $ 6,300

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The number of units that must be sold to achieve a target profit of $16,100 is closest to:

A) 32,000 units

B) 19,400 units

C) 10,400 units

D) 23,000 units

211) Maruca Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 270,000

Variable expenses 175,500

Contribution margin 94,500

Fixed expenses 86,100

Net operating income $ 8,400

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

A) $175,500

B) $261,600

C) $246,000

D) $0

212) Maruca Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (9,000 units) $ 270,000

Variable expenses 175,500

Contribution margin 94,500

Fixed expenses 86,100

Net operating income $ 8,400

The margin of safety in dollars is closest to:

A) $86,100

B) $8,400

C) $24,000

D) $94,500

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213) Golebiewski Corporation has provided the following contribution format income

statement. Assume that the following information is within the relevant range.

Sales (5,000 units) $ 150,000

Variable expenses 112,500

Contribution margin 37,500

Fixed expenses 35,250

Net operating income $ 2,250

The margin of safety in dollars is closest to:

A) $2,250

B) $9,000

C) $35,250

D) $37,500

214) Golebiewski Corporation has provided the following contribution format income

statement. Assume that the following information is within the relevant range.

Sales (5,000 units) $ 150,000

Variable expenses 112,500

Contribution margin 37,500

Fixed expenses 35,250

Net operating income $ 2,250

The margin of safety percentage is closest to:

A) 2%

B) 24%

C) 75%

D) 6%

215) Shambo Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $ 60,000

Variable expenses 42,000

Contribution margin 18,000

Fixed expenses 13,200

Net operating income $ 4,800

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The margin of safety percentage is closest to:

A) 27%

B) 70%

C) 22%

D) 8%

216) Shambo Corporation has provided the following contribution format income statement.

Assume that the following information is within the relevant range.

Sales (3,000 units) $ 60,000

Variable expenses 42,000

Contribution margin 18,000

Fixed expenses 13,200

Net operating income $ 4,800

Using the degree of operating leverage, the estimated percent increase in net operating income as

the result of a 20% increase in sales volume is closest to: (Round your intermediate

calculations to 2 decimal places.)

A) 75.00%

B) 1.60%

C) 250.00%

D) 5.33%

217) A company that makes organic fertilizer has supplied the following data:

Bags produced and sold 200,000

Sales revenue $ 1,560,000

Variable manufacturing expense $ 660,000

Fixed manufacturing expense $ 448,000

Variable selling and administrative expense $ 180,000

Fixed selling and administrative expense $ 214,000

Net operating income $ 58,000

The company’s margin of safety in units is closest to: (Round per unit calculations to 2

decimal places.)

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A) 115,128 units

B) 16,111 units

C) 168,986 units

D) 100,444 units

218) A company that makes organic fertilizer has supplied the following data:

Bags produced and sold 200,000

Sales revenue $ 1,560,000

Variable manufacturing expense $ 660,000

Fixed manufacturing expense $ 448,000

Variable selling and administrative expense $ 180,000

Fixed selling and administrative expense $ 214,000

Net operating income $ 58,000

The company’s unit contribution margin is closest to: (Round your intermediate calculations

to 2 decimal places.)

A) $4.50 per unit

B) $6.90 per unit

C) $3.60 per unit

D) $4.20 per unit

219) A company that makes organic fertilizer has supplied the following data:

Bags produced and sold 200,000

Sales revenue $ 1,560,000

Variable manufacturing expense $ 660,000

Fixed manufacturing expense $ 448,000

Variable selling and administrative expense $ 180,000

Fixed selling and administrative expense $ 214,000

Net operating income $ 58,000

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

A) 1.27

B) 26.90

C) 3.45

D) 12.41

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220) A manufacturer of premium wire strippers has supplied the following data:

Units produced and sold 580,000

Sales revenue $ 4,176,000

Variable manufacturing expense $ 2,871,000

Fixed manufacturing expense $ 778,000

Variable selling and administrative expense $ 348,000

Fixed selling and administrative expense $ 104,000

Net operating income $ 75,000

The company’s margin of safety in units is closest to: (Round per unit calculations to 2

decimal places.)

A) 234,222 units

B) 564,242 units

C) 45,455 units

D) 457,500 units

221) A manufacturer of premium wire strippers has supplied the following data:

Units produced and sold 580,000

Sales revenue $ 4,176,000

Variable manufacturing expense $ 2,871,000

Fixed manufacturing expense $ 778,000

Variable selling and administrative expense $ 348,000

Fixed selling and administrative expense $ 104,000

Net operating income $ 75,000

The company’s unit contribution margin is closest to:

A) $2.25 per unit

B) $5.55 per unit

C) $1.65 per unit

D) $6.60 per unit

222) A manufacturer of premium wire strippers has supplied the following data:

Units produced and sold 580,000

Sales revenue $ 4,176,000

Variable manufacturing expense $ 2,871,000

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Fixed manufacturing expense $ 778,000

Variable selling and administrative expense $ 348,000

Fixed selling and administrative expense $ 104,000

Net operating income $ 75,000

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

A) 55.68

B) 3.65

C) 7.73

D) 12.76

223) A manufacturer of cedar shingles has supplied the following data:

Bundles of cedar shakes produced and sold 360,000

Sales revenue $ 2,412,000

Variable manufacturing expense $ 1,170,000

Fixed manufacturing expense $ 714,000

Variable selling and administrative expense $ 414,000

Fixed selling and administrative expense $ 82,000

Net operating income $ 32,000

The company’s break-even in unit sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) 118,806

B) 206,957

C) 346,087

D) 14,775

224) A manufacturer of cedar shingles has supplied the following data:

Bundles of cedar shakes produced and sold 360,000

Sales revenue $ 2,412,000

Variable manufacturing expense $ 1,170,000

Fixed manufacturing expense $ 714,000

Variable selling and administrative expense $ 414,000

Fixed selling and administrative expense $ 82,000

Net operating income $ 32,000

The company’s contribution margin ratio is closest to:

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A) 72.6%

B) 65.7%

C) 34.3%

D) 27.4%

225) A manufacturer of cedar shingles has supplied the following data:

Bundles of cedar shakes produced and sold 360,000

Sales revenue $ 2,412,000

Variable manufacturing expense $ 1,170,000

Fixed manufacturing expense $ 714,000

Variable selling and administrative expense $ 414,000

Fixed selling and administrative expense $ 82,000

Net operating income $ 32,000

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

A) 11.25

B) 25.88

C) 1.99

D) 75.38

226) A manufacturer of tiling grout has supplied the following data:

Kilograms produced and sold 380,000

Sales revenue $ 2,736,000

Variable manufacturing expense $ 1,349,000

Fixed manufacturing expense $ 336,000

Variable selling and administrative expense $ 399,000

Fixed selling and administrative expense $ 372,000

Net operating income $ 280,000

The company’s break-even in unit sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) 272,308

B) 98,333

C) 92,055

D) 60,488

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227) A manufacturer of tiling grout has supplied the following data:

Kilograms produced and sold 460,000

Sales revenue $ 1,850,000

Variable manufacturing expense $ 944,000

Fixed manufacturing expense $ 234,000

Variable selling and administrative expense $ 352,000

Fixed selling and administrative expense $ 200,000

Net operating income $ 120,000

The company’s contribution margin ratio is closest to:

A) 49.0%

B) 81.0%

C) 29.9%

D) 76.5%

228) A manufacturer of tiling grout has supplied the following data:

Kilograms produced and sold 380,000

Sales revenue $ 2,736,000

Variable manufacturing expense $ 1,349,000

Fixed manufacturing expense $ 336,000

Variable selling and administrative expense $ 399,000

Fixed selling and administrative expense $ 372,000

Net operating income $ 280,000

The company’s contribution margin ratio is closest to:

A) 28.9%

B) 63.9%

C) 71.1%

D) 36.1%

229) A manufacturer of tiling grout has supplied the following data:

Kilograms produced and sold 380,000

Sales revenue $ 2,736,000

Variable manufacturing expense $ 1,349,000

Fixed manufacturing expense $ 336,000

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Variable selling and administrative expense $ 399,000

Fixed selling and administrative expense $ 372,000

Net operating income $ 280,000

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

A) 9.77

B) 1.36

C) 3.53

D) 2.47

230) Houpe 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%

Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.

The marketing manager believes that a $14,000 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?

A) increase of $700

B) increase of $14,700

C) decrease of $14,000

D) decrease of $700

231) Houpe 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%

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Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.

Management is considering using a new component that would increase the unit variable cost by

$5. Since the new component would increase the features of the company’s product, the

marketing manager predicts that monthly sales would increase by 300 units. What should be the

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

A) decrease of $2,100

B) decrease of $27,900

C) increase of $2,100

D) increase of $27,900

232) Houpe 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%

Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.

The marketing manager would like to cut the selling price by $7 and increase the advertising

budget by $28,000 per month. The marketing manager predicts that these two changes would

increase monthly sales by 500 units. What should be the overall effect on the company’s monthly

net operating income of this change?

A) decrease of $17,500

B) increase of $17,500

C) decrease of $24,500

D) increase of $38,500

233) Houpe 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%

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Fixed expenses are $490,000 per month. The company is currently selling 6,000 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 $11 per unit. In exchange, the sales

staff would accept a decrease in their salaries of $58,000 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?

A) increase of $700

B) increase of $56,900

C) decrease of $115,300

D) increase of $588,700

234) Data concerning Lemelin 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 7,000 units per month. Fixed expenses are $581,000 per month.

Management is considering using a new component that would increase the unit variable cost

by $3. Since the new component would increase the features of the company’s product, the

marketing manager predicts that monthly sales would increase by 200 units. What should be the

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

A) decrease of $22,400

B) decrease of $1,400

C) increase of $22,400

D) increase of $1,400

235) Data concerning Lemelin Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 230 100%

Variable expenses 115 50%

Contribution margin $ 115 50%

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The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.

The marketing manager believes that an $11,000 increase in the monthly advertising budget

would result in a 100 unit increase in monthly sales. What should be the overall effect on the

company’s monthly net operating income of this change?

A) decrease of $11,000

B) increase of $11,500

C) decrease of $500

D) increase of $500

236) Data concerning Lemelin 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 7,000 units per month. Fixed expenses are $581,000 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 $20 per unit. In exchange, the sales

staff would accept a decrease in their salaries of $113,000 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 300 units. What should be the overall effect on the

company’s monthly net operating income of this change?

A) decrease of $224,500

B) increase of $107,000

C) increase of $1,500

D) increase of $806,500

237) Data concerning Lemelin Corporation’s single product appear below:

Per Unit Percent of Sales

Selling price $ 230 100%

Variable expenses 115 50%

Contribution margin $ 115 50%

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The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.

The marketing manager would like to cut the selling price by $18 and increase the advertising

budget by $37,000 per month. The marketing manager predicts that these two changes would

increase monthly sales by 1,600 units. What should be the overall effect on the company’s

monthly net operating income of this change?

A) increase of $118,200

B) increase of $302,200

C) decrease of $118,200

D) decrease of $7,800

238) Thornbrough Corporation produces and sells a single product with the following

characteristics:

Per Unit Percent of Sales

Selling price $ 220 100%

Variable expenses 44 20%

Contribution margin $ 176 80%

The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per

month.

Management is considering using a new component that would increase the unit variable cost

by $11. 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?

A) increase of $82,500

B) decrease of $5,500

C) decrease of $82,500

D) increase of $5,500

239) Thornbrough Corporation produces and sells a single product with the following

characteristics:

Per Unit Percent of Sales

Selling price $ 220 100%

Variable expenses 44 20%

Contribution margin $ 176 80%

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The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month.

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?

A) decrease of $28,000

B) increase of $33,440

C) increase of $5,440

D) decrease of $5,440

240) Thornbrough Corporation produces and sells a single product with the following

characteristics:

Per Unit Percent of Sales

Selling price $ 220 100%

Variable expenses 44 20%

Contribution margin $ 176 80%

The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month.

The marketing manager would like to cut the selling price by $18 and increase the advertising

budget by $53,000 per month. The marketing manager predicts that these two changes would

increase monthly sales by 1,000 units. What should be the overall effect on the company’s

monthly net operating income of this change?

A) decrease of $105,000

B) increase of $149,000

C) increase of $105,000

D) decrease of $21,000

241) Thornbrough Corporation produces and sells a single product with the following

characteristics:

Per Unit Percent of Sales

Selling price $ 220 100%

Variable expenses 44 20%

Contribution margin $ 176 80%

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The company is currently selling 7,000 units per month. Fixed expenses are $901,000 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 $11 per unit. In exchange, the sales

staff would accept a decrease in their salaries of $65,000 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 300 units. What should be the overall effect on the

company’s monthly net operating income of this change?

A) increase of $1,269,500

B) increase of $37,500

C) increase of $61,700

D) decrease of $92,500

242) Heathman Incorporated produces and sells a single product. The selling price of the

product is $230.00 per unit and its variable cost is $89.70 per unit. The fixed expense is

$308,660 per month.

The break-even in monthly unit sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) 2,328 units

B) 1,342 units

C) 3,441 units

D) 2,200 units

243) Heathman Incorporated produces and sells a single product. The selling price of the

product is $230.00 per unit and its variable cost is $89.70 per unit. The fixed expense is

$308,660 per month.

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations

to 2 decimal places.)

A) $791,436

B) $535,365

C) $506,000

D) $308,660

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244) Data concerning Sinisi Corporation’s single product appear below:

Selling price per unit $ 200.00

Variable expense per unit 58.00

Fixed expense per month $ 407,540

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

A) 2,038 units

B) 7,027 units

C) 2,870 units

D) 3,978 units

245) Data concerning Sinisi Corporation’s single product appear below:

Selling price per unit $ 200.00

Variable expense per unit 58.00

Fixed expense per month $ 407,540

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) $407,600

B) $1,405,400

C) $574,000

D) $795,600

246) Zanetti Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 110.00

Variable expense per unit $ 34.10

Fixed expense per month $ 132,066

The break-even in monthly unit sales is closest to: (Round your intermediate calculations to 2

decimal places.)

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A) 3,873 units

B) 1,740 units

C) 1,201 units

D) 2,271 units

247) Zanetti Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 110.00

Variable expense per unit $ 34.10

Fixed expense per month $ 132,066

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to

2 decimal places.)

A) $191,400

B) $249,810

C) $426,030

D) $132,110

248) Junior Bodway, Incorporated, has provided the following budgeted data:

Sales $ 10,000 units

Selling price $ 50 per unit

Variable expense $ 30 per unit

Fixed expense $ 180,000

What is the company’s break-even point in sales dollars?

A) $450,000

B) $180,000

C) $300,000

D) $500,000

249) Junior Bodway, Incorporated, has provided the following budgeted data:

Sales 10,000 units

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Selling price $ 50 per unit

Variable expense $ 30 per unit

Fixed expense $ 180,000

How many units would the company have to sell in order to have a net operating income of

$40,000?

A) 20,000 units

B) 9,000 units

C) 11,000 units

D) 7,333 units

250) Junior Bodway, Incorporated, has provided the following budgeted data:

Sales 10,000 units

Selling price $ 50 per unit

Variable expense $ 30 per unit

Fixed expense $ 180,000

At the budgeted sales level of 10,000 units, what is the company’s degree of operating leverage?

A) 10.0

B) 6.0

C) 22.5

D) 5.0

251) Maziarz Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 220.00

Variable expense per unit $ 72.60

Fixed expense per month $ 548,328

Assume the company’s target profit is $14,000. The unit sales to attain that target profit is closest

to: (Round your intermediate calculations to 2 decimal places.)

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A) 7,746 units

B) 2,556 units

C) 4,706 units

D) 3,815 units

252) Maziarz Corporation produces and sells a single product. Data concerning that product

appear below:

Selling price per unit $ 220.00

Variable expense per unit $ 72.60

Fixed expense per month $ 548,328

Assume the company’s target profit is $16,000. The dollar sales to attain that target profit is

closest to: (Round your intermediate calculations to 2 decimal places.)

A) $564,328

B) $1,710,085

C) $1,038,898

D) $842,281

253) Speckman Enterprises, Incorporated, produces and sells a single product whose selling

price is $200.00 per unit and whose variable expense is $68.00 per unit. The company’s monthly

fixed expense is $514,800.

Assume the company’s target profit is $11,000. The unit sales to attain that target profit is

closest to:

A) 2,629 units

B) 3,983 units

C) 4,781 units

D) 7,732 units

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254) Speckman Enterprises, Incorporated, produces and sells a single product whose selling

price is $200.00 per unit and whose variable expense is $68.00 per unit. The company’s monthly

fixed expense is $514,800.

Assume the company’s target profit is $12,000. The dollar sales to attain that target profit is

closest to: (Round your intermediate calculations to 2 decimal places.)

A) $1,549,412

B) $798,182

C) $526,800

D) $958,131

255) Data concerning Strite Corporation’s single product appear below:

Selling price per unit $ 150.00

Variable expense per unit $ 42.00

Fixed expense per month $ 421,200

Assume the company’s target profit is $17,000. The unit sales to attain that target profit is closest

to:

A) 5,804 units

B) 2,921 units

C) 4,057 units

D) 10,433 units

256) Data concerning Strite Corporation’s single product appear below:

Selling price per unit $ 150.00

Variable expense per unit $ 42.00

Fixed expense per month $ 421,200

Assume the company’s target profit is $8,000. The dollar sales to attain that target profit is

closest to: (Round your intermediate calculations to 2 decimal places.)

A) $429,200

B) $596,111

C) $1,532,857

D) $852,723

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257) Highjinks, Incorporated, has provided the following budgeted data:

Sales 20,000 units

Selling price $ 100 per unit

Variable expense $ 70 per unit

Fixed expense $ 450,000

What is the company’s margin of safety as a percentage of sales?

A) 50%

B) 25%

C) 75%

D) 100%

258) Highjinks, Incorporated, has provided the following budgeted data:

Sales 20,000 units

Selling price $ 100 per unit

Variable expense $ 70 per unit

Fixed expense $ 450,000

How many units would the company have to sell in order to have a net operating income equal to

5% of total sales dollars?

A) 18,000 units

B) 20,000 units

C) 15,333 units

D) 14,286 units

259) Jerrel Corporation sells a product for $230 per unit. The product’s current sales are

24,000 units and its break-even sales are 17,280 units.

What is the margin of safety in dollars?

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A) $5,520,000

B) $1,545,600

C) $3,974,400

D) $3,680,000

260) Jerrel Corporation sells a product for $230 per unit. The product’s current sales are

24,000 units and its break-even sales are 17,280 units.

The margin of safety as a percentage of sales is closest to:

A) 61%

B) 28%

C) 72%

D) 39%

261) Maruska Corporation has provided the following data concerning its only product:

Selling price $ 180 per unit

Current sales 29,800 units

Break-even sales 25,032 units

What is the margin of safety in dollars?

A) $4,505,760

B) $858,240

C) $3,576,000

D) $5,364,000

262) Maruska Corporation has provided the following data concerning its only product:

Selling price $ 180 per unit

Current sales 29,800 units

Break-even sales 25,032 units

The margin of safety as a percentage of sales is closest to:

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A) 19%

B) 16%

C) 84%

D) 81%

263) Bois Corporation has provided its contribution format income statement for January.

Sales $ 426,400

Variable expenses 260,000

Contribution margin 166,400

Fixed expenses 120,900

Net operating income $ 45,500

The degree of operating leverage is closest to:

A) 0.11

B) 9.37

C) 0.27

D) 3.66

264) Bois Corporation has provided its contribution format income statement for January.

Sales $ 426,400

Variable expenses 260,000

Contribution margin 166,400

Fixed expenses 120,900

Net operating income $ 45,500

If the company’s sales volume increases by 7%, its net operating income should increase by

about:

A) 26%

B) 7%

C) 66%

D) 11%

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265) 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

266) 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 volume is closest to: (Round your intermediate calculations

to 1 decimal place.)

A) 0.29%

B) 87.50%

C) 0.11%

D) 218.75%

267) 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:

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A) 0.23

B) 0.10

C) 4.35

D) 9.76

268) 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 volume increases by 19%, its net operating income should increase by

about:

A) 10%

B) 19%

C) 83%

D) 186%

269) Dietrick Corporation produces and sells two products. Data concerning those products for

the most recent month appear below:

Product B32L Product K84B

Sales $ 46,000 $ 27,000

Variable expenses $ 13,800 $ 14,670

Fixed expenses for the entire company were $42,550.

The break-even point for the entire company is closest to: (Round your intermediate

calculations to 2 decimal places.)

A) $42,550

B) $71,020

C) $69,754

D) $30,450

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270) Dietrick Corporation produces and sells two products. Data concerning those products for

the most recent month appear below:

Product B32L Product K84B

Sales $ 46,000 $ 27,000

Variable expenses $ 13,800 $ 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.

271) Ingrum Corporation produces and sells two products. In the most recent month, Product

R38T had sales of $32,500 and variable expenses of $8,740. Product X08S had sales of $53,500

and variable expenses of $17,920. The fixed expenses of the entire company were $35,980.

The break-even point for the entire company is closest to:

A) $86,000

B) $52,145

C) $35,980

D) $60,406

272) 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: (Round your intermediate

calculations to 2 decimal places.)

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A) $41,160

B) $17,840

C) $53,455

D) $54,730

273) 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.

274) Incremental analysis is an analytical approach that focuses only on those revenues and

costs that will not change as a result of a decision.

⊚ true

⊚ false

275) When expressed on a per unit basis, fixed costs can mislead decision makers into

thinking of them as variable costs.

⊚ true

⊚ false

276) To estimate what the profit will be at various levels of sales volume, multiply the number

of units to be sold above or below the break-even point by the unit contribution margin.

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⊚ true

⊚ false

277) In a Cost-Volume-Profit graph (sometimes called a break-even chart), unit volume is

represented on the horizontal (X) axis and dollars on the vertical (Y) axis.

⊚ true

⊚ false

278) On a Cost-Volume-Profit graph for a profitable company, the total expense line will be

steeper than the total revenue line.

⊚ true

⊚ false

279) In a Cost-Volume-Profit 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.

⊚ true

⊚ false

280) A shift in the sales mix from low-margin items to high-margin items will decrease total

profits even though total sales increase.

⊚ true

⊚ false

281) A shift in the sales mix from high-margin items to low-margin items can cause total

profits to decrease even though total sales may increase.

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⊚ true

⊚ false

282) 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.

⊚ true

⊚ false

283) If the variable expense per unit decreases, and all other factors remain the same, the

contribution margin ratio will increase.

⊚ true

⊚ false

284) The smaller the contribution margin ratio, the smaller the amount of sales required to

cover a given amount of fixed expenses.

⊚ true

⊚ false

285) For a given level of sales, a low contribution margin ratio will produce more net

operating income than a high contribution margin ratio.

⊚ true

⊚ false

286) If fixed expenses increase by $10,000 per year, then the sales needed to break even will

generally increase by more than $10,000.

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⊚ true

⊚ false

287) A decrease in the number of units sold will decrease the break-even point.

⊚ true

⊚ false

288) The break-even point in units can be obtained by dividing total fixed expenses by the unit

contribution margin.

⊚ true

⊚ false

289) The break-even point can be determined by simply adding together all of the expenses

from the income statement.

⊚ true

⊚ false

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

⊚ true

⊚ false

291) For a capital intensive, automated company the break-even point will tend to be higher

and the margin of safety will be lower than for a less capital intensive company with the same

sales.

⊚ true

⊚ false

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292) The total volume in sales dollars that would be required to attain a given target profit is

determined by dividing the target profit by the contribution margin ratio.

⊚ true

⊚ false

293) Two companies with the same margin of safety in dollars will also have the same total

contribution margin.

⊚ true

⊚ false

294) Fawn Company’s margin of safety is $90,000. If the company’s sales drop by $80,000, it

will still have positive net operating income.

⊚ true

⊚ false

295) The margin of safety is the amount by which sales can decrease before losses are incurred

by the company.

⊚ true

⊚ false

296) The margin of safety percentage is equal to the margin of safety in dollars divided by

total contribution margin.

⊚ true

⊚ false

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297) The degree of operating leverage in a company is smallest at the break-even point and

increases as salesvolumes rise.

⊚ true

⊚ false

298) The degree of operating leverage is computed by dividing sales by the contribution

margin.

⊚ true

⊚ false

299) A company with high operating leverage will experience a larger reduction in net

operating income in a period of declining salesvolume than a company with low operating

leverage.

⊚ true

⊚ false

300) A shift in the sales mix from products with high contribution margin ratios toward

products with low contribution margin ratios will raise the break-even point for the company as a

whole.

⊚ true

⊚ false

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Answer Key

Test name: chapter 5

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