Exam 2: Cost-Volume-Profit Relationships

Arthur Corporation has a margin of safety percentage of 25% based on its actual sales.The break-even point is $300, 000 and the variable expenses are 45% of sales.Given this information, the actual profit is:

All other things the same, an increase in variable expense per unit will reduce the break-even point.

The degree of operating leverage in a company is largest at the break-even point and decreases as sales rise.

The July contribution format income statement of Raiche Corporation appears below: If the company's sales increase by 5%, its net operating income should increase by about:

Data concerning Marchman Corporation's single product appear below: The company is currently selling 4, 000 units per month.Fixed expenses are $166, 000 per month.Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Marchman Corporation.Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $2.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?

The management of Pacubas Corporation expects sales in July to be $121, 000.The company's contribution margin ratio is 64% and its fixed monthly expenses are $40, 000. Required: Estimate the company's net operating income for July, assuming that the fixed monthly expenses do not change.Show your work!

The selling price of Roscioli Corporation's only product is $210.00 per unit and its variable expense is $75.60 per unit.The company's monthly fixed expense is $537, 600. Required: Assume the company's monthly target profit is $13, 440.Determine the unit sales to attain that target profit.Show your work!

Hitchens Inc.produces and sells two products.Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $24, 010.The break-even point for the entire company is closest to:

Garth Corporation sells a single product.If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then:

A cement manufacturer has supplied the following data: If the company increases its unit sales volume by 5% without increasing its fixed expenses, then total net operating income should be closest to:

Brower Inc.has provided the following data concerning its only product: Required: Compute the margin of safety in both dollars and as a percentage of sales.

Brees Inc. , a company that produces and sells a single product, has provided its contribution format income statement for April. If the company sells 5, 800 units, its total contribution margin should be closest to:

A company that makes organic fertilizer has supplied the following data: The company's margin of safety in units is closest to:

The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe.Agate expects the following operating results next year for each type of bookcase: Agate expects to have a total of $57, 600 in fixed expenses next year.What is Agate's break-even point next year in sales dollars?

The following monthly data are available for the Wyatt Corporation and its only product: The margin of safety for the company during May was:

All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase.

Wrobbel Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $307, 000 per month.The company is currently selling 6, 000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $2.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? Show your work!

Blane Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly unit sales is closest to:

Sammis Inc, which produces and sells a single product, has provided its contribution format income statement for January. If the company sells 2, 600 units, its total contribution margin should be closest to:

Maack Corporation's contribution margin ratio is 16% and its fixed monthly expenses are $44, 000.If the company's sales for a month are $299, 000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.