Exam 10: Cost-Volume-Profit Relationships

The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Required: a. What is the company's contribution margin ratio? b. What is the company's break-even in units? c. If sales increase by 100 units, by how much should net operating income increase? d. How many units would the company have to sell to attain a target profit of $125,000? e. What is the company's margin of safety in dollars? f. What is the company's degree of operating leverage?

If the company sells 2,500 units, its net operating income should be closest to:

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!

Steeler Corporation is planning to sell 100,000 units for $2.00 per unit and will break even at this level of sales. Fixed expenses will be $75,000. What are the company's variable expenses per unit?

What is the margin of safety in dollars?

Joly Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $511,000 per month. The company is currently selling 5,000 units per month. The marketing manager would like to cut the selling price by $16 and increase the advertising budget by $33,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 800 units. What should be the overall effect on the company's monthly net operating income of this change?

Comings Corporation produces and sells two products. In the most recent month, Product R19J had sales of $30,000 and variable expenses of $9,000. Product O37G had sales of $34,000 and variable expenses of $10,840. The fixed expenses of the entire company were $35,560. If the sales mix were to shift toward Product R19J with total dollar sales remaining constant, the overall break-even point for the entire company:

On a cost-volume-profit graph, the revenue line will be shown below the total expense line for any activity level above the break-even point.

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:

This question is to be considered independently of all other questions relating to Boenisch 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?

All other things the same, an increase in total fixed expenses will increase the break-even point.

The company's contribution margin ratio is closest to:

The degree of operating leverage is closest to:

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

Florek Inc. produces and sells a single product. The company has provided its contribution format income statement for March. If the company sells 5,900 units, its net operating income should be closest to:

If the company increases its unit sales volume by 5% without increasing its fixed expenses, then total net operating income should be closest to:

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:

Larita Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $243,000 per month. The company is currently selling 2,000 units per month. Required: The marketing manager believes that a $28,000 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? Show your work!

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

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