Chapter 05 – Cost-Volume-Profit Relationships
40. Sensabaugh Inc., a company that produces and sells a single product, has provided its
contribution format income statement for January.
If the company sells 1,600 units, its total contribution margin should be closest to:
Chapter 05 – Cost-Volume-Profit Relationships
41. Gaudy Inc. produces and sells a single product. The company has provided its
contribution format income statement for May.
If the company sells 4,300 units, its net operating income should be closest to:
Chapter 05 – Cost-Volume-Profit Relationships
42. The contribution margin ratio is 25% for Grain Company and the break-even point in
sales is $200,000. To obtain a target net operating income of $60,000, sales would have to be:
Chapter 05 – Cost-Volume-Profit Relationships
43. The contribution margin ratio is 30% for the Honeyville Company and the break-even
point in sales is $150,000. If the company’s target net operating income is $60,000, sales
would have to be:
Chapter 05 – Cost-Volume-Profit Relationships
44. Rothe Company manufactures and sells a single product that it sells for $90 per unit and
has a contribution margin ratio of 35%. The company’s fixed expenses are $46,800. If Rothe
desires a monthly target net operating income equal to 15% of sales, the amount of sales in
units will have to be (rounded):
Chapter 05 – Cost-Volume-Profit Relationships
45. The Herald Company manufactures and sells a single product which sells for $50 per unit
and has a contribution margin ratio of 30%. The company’s monthly fixed expenses are
$25,000. If Herald desires a monthly target net operating income equal to 20% of sales
dollars, sales in units will have to be (rounded):
Chapter 05 – Cost-Volume-Profit Relationships
46. Street Company’s fixed expenses total $150,000, its variable expense ratio is 60% and its
variable expenses are $4.50 per unit. Based on this information, the break-even point in units
is:
Chapter 05 – Cost-Volume-Profit Relationships
47. South Company sells a single product for $20 per unit. If variable expenses are 60% of
sales and fixed expenses total $9,600, the break-even point will be:
Chapter 05 – Cost-Volume-Profit Relationships
48. Turner Company’s contribution margin ratio is 15%. If the degree of operating leverage is
12 at the $150,000 sales level, net operating income at the $150,000 sales level must equal:
Chapter 05 – Cost-Volume-Profit Relationships
49. Patterson Company’s variable expenses are 55% of sales. At a $400,000 sales level, the
degree of operating leverage is 5. If sales increase by $30,000, the new degree of operating
leverage will be (rounded):
Chapter 05 – Cost-Volume-Profit Relationships
50. Darth Company sells three products. Sales and contribution margin ratios for the three
products follow:
Given these data, the contribution margin ratio for the company as a whole would be:
Chapter 05 – Cost-Volume-Profit Relationships
51. Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the
fixed expenses total $35,000 per period. By how much will net operating income change if
sales are expected to increase by $40,000?
52. Knoke Corporation’s contribution margin ratio is 29% and its fixed monthly expenses are
$17,000. If the company’s sales for a month are $98,000, what is the best estimate of the
company’s net operating income? Assume that the fixed monthly expenses do not change.
Chapter 05 – Cost-Volume-Profit Relationships
53. Balonek Inc.’s contribution margin ratio is 57% and its fixed monthly expenses are
$41,000. 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 $112,000?
54. Danneman Corporation’s fixed monthly expenses are $13,000 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 $41,000?
Chapter 05 – Cost-Volume-Profit Relationships
55. Sinclair Company’s single product has a selling price of $25 per unit. Last year the
company reported a profit of $20,000 and variable expenses totaling $180,000. The product
has a 40% contribution margin ratio. Because of competition, Sinclair Company will be
forced in the current year to reduce its selling price by $2 per unit. How many units must be
sold in the current year to earn the same profit as was earned last year?
Chapter 05 – Cost-Volume-Profit Relationships
56. Pool Company’s variable expenses are 36% of sales. Pool is contemplating an advertising
campaign that will cost $20,000. If sales increase by $80,000, the company’s net operating
income should increase by:
Chapter 05 – Cost-Volume-Profit Relationships
57. Loren Company’s single product has a selling price of $15 per unit. Last year the company
reported total variable expenses of $180,000, fixed expenses of $90,000, and a net operating
income of $30,000. A study by the sales manager discloses that a 15% increase in the selling
price would reduce unit sales by 10%. If her proposal is adopted, net operating income
would:
Chapter 05 – Cost-Volume-Profit Relationships
58. Data concerning Runnells Corporation’s single product appear below:
The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per
month. The marketing manager believes that a $7,000 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?
Chapter 05 – Cost-Volume-Profit Relationships
59. Weinreich Corporation produces and sells a single product. Data concerning that product
appear below:
The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per
month. The marketing manager believes that an $18,000 increase in the monthly advertising
budget would result in a 170 unit increase in monthly sales. What should be the overall effect
on the company’s monthly net operating income of this change?
Chapter 05 – Cost-Volume-Profit Relationships
60. Data concerning Lancaster Corporation’s single product appear below:
Fixed expenses are $105,000 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 $44. 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?
Chapter 05 – Cost-Volume-Profit Relationships
61. Ribb Corporation produces and sells a single product. Data concerning that product appear
below:
Fixed expenses are $913,000 per month. The company is currently selling 9,000 units per
month. Management is considering using a new component that would increase the unit
variable cost by $6. 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?