Exam 6: Cost-Volume-Profit Relationship

The contribution margin ratio of Lukasiewicz Corporation's only product is 62%. The company's monthly fixed expense is $297,600 and the company's monthly target profit is $37,200. Required: Determine the dollar sales to attain the company's target profit. Show your work!

Merced Corporation has provided the following budgeted data: -If the selling price is raised by $5 per unit, the break-even point in units will be:

Last year, variable expenses were 60% of total sales and fixed expenses were 10% of total sales. If the company increases its selling prices by 10%, but if fixed expenses, variable costs per unit, and unit sales remain unchanged, the effect of the increase in selling price on the company's total contribution margin would be:

The following data concern two products sold by Redding Corporation. -If the sales mix shifts toward Product X, and product contribution margin ratios remain unchanged, one would expect the break-even point for the company as a whole to:

Boor International, Inc., produces and sells a single product. The product sells for $110.00 per unit and its variable expense is $37.40 per unit. The company's monthly fixed expense is $188,034. Required: Determine the monthly break-even in total dollar sales. Show your work!

On a CVP graph for a profitable company, the line representing total expenses is steeper than the line representing total revenue.

Gurr Corporation produces and sells a single product whose contribution margin ratio is 63%. The company's monthly fixed expense is $604,800 and the company's monthly target profit is $50,400. Required: Determine the dollar sales to attain the company's target profit. Show your work!

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -How many units would the company have to sell to attain the target profit of $150,000?

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

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month. -If sales increase by 100 units, by how much should net operating income increase?

The degree of operating leverage is greatest at sales levels near the break-even point and decreases as sales rise.

Janet Company produces a game that sells for $17 per game. Variable expenses are $9 per game and fixed expenses total $172,000 annually. -The contribution margin ratio is closest to:

The following data concern two products sold by Redding Corporation. -If fixed expenses for the company as a whole are $120,000, the break-even point would be:

Speir Corporation's contribution format income statement for the most recent month follows: 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.

At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?

Mitch Corporation's contribution margin ratio is 14% and its fixed monthly expenses are $87,000. If the company's sales for a month are $678,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

Junsin Corporation's budget for next year appears below. The budget assumes the company will sell 30,000 units. -The break-even point in annual sales dollars is:

The following monthly data are available for the Challenger Company and its only product, Product SW: Required: a. Without resorting to calculations, what is the total contribution margin at the break-even point? b. Management is contemplating the use of plastic gearing rather than metal gearing in Product SW. This change would reduce variable costs by $15. The company's marketing manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of 350 units per month. Should this change be made? c. Assume that Challenger Company is currently selling 400 units of Product SW per month. Management wants to increase sales and feels this can be done by cutting the selling price by $25 per unit and increasing the advertising budget by $20,000 per month. Management believes that these actions will increase unit sales by 50%. Should these changes be made? d. Assume that Challenger Company is currently selling 400 units of Product SW. Management wants to automate a portion of the production process for Product SW. The new equipment would reduce direct labor costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000. Management believes that the new equipment will increase the reliability of Product SW thus resulting in an increase in monthly sales of 12%. Should these changes be made?

Hilty Corporation produces and sells two products. In the most recent month, Product U77D had sales of $45,000 and variable expenses of $15,750. Product D86D had sales of $49,000 and variable expenses of $22,790. And the fixed expenses of the entire company were $46,170. The break-even point for the entire company is closest to:

Last year, Twins Company reported $750,000 in sales (25,000 units) and a net operating income of $25,000. At the break-even point, the company's total contribution margin equals $500,000. Based on this information, the company's: