Exam 6: Cost-Volume-Profit Relationships

Bohlen Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $716,000 per month.The company is currently selling 6,000 units per month.Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Bohlen Corporation.Refer to the original data when answering this question. 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 a decrease in their salaries of $84,000 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 600 units.What should be the overall effect on the company's monthly net operating income of this change?

The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales.

The Clyde Corporation's variable expenses are 35% of sales.Clyde Corporation is contemplating an advertising campaign that will cost $25,000.If sales increase by $75,000,the company's net operating income will increase by:

Xiong Corporation makes a product that sells for $130 per unit.The product's current sales are 14,000 units and its break-even sales are 10,220 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

Carlton Corporation sells a single product at a selling price of $40 per unit.Variable expenses are $22 per unit and fixed expenses are $82,800.Carlton's break-even point is:

Incremental analysis is generally the most complicated and least direct approach to decision making.

Data concerning Matsumoto Corporation's single product appear below: Assume the company's target profit is $5,000.The unit sales to attain that target profit is closest to:

A tile manufacturer has supplied the following data: What is the company's unit contribution margin?

Boenisch Corporation produces and sells a single product with the following characteristics: The company is currently selling 8,000 units per month.Fixed expenses are $406,000 per month.Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Boenisch 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 $3.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?

Bianchini Corporation's contribution margin ratio is 58% and its fixed monthly expenses are $94,000.Assume that the company's sales for May are expected to be $178,000. Required: Estimate the company's net operating income for May,assuming that the fixed monthly expenses do not change.Show your work!

At the break-even point,the total contribution margin and fixed expenses are equal.

As total sales increase beyond the break-even point,the degree of operating leverage will decrease.

Mcallister Corporation has provided the following data concerning its only product: The margin of safety as a percentage of sales is closest to:

One assumption in CVP analysis is that the number of units produced and sold does not change.

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:

Data concerning Wang Corporation's single product appear below: The break-even in monthly dollar sales is closest to:

Data concerning Bunck Corporation's single product appear below: Fixed expenses are $202,000 per month.The company is currently selling 2,000 units per month.Management is considering using a new component that would increase the unit variable cost by $18.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?

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.

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.

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: