Question 1

If sales increase by 200 units,by how much should before-tax profits increase?

Accepted Answer

A)  $16,000. 
B)  $5,000. 
C)  $2,000. 
D)  $10,000.

Question 2

If the company wants to increase its total contribution margin by 40% in the next year,all other factors remaining the same,by how much will it need to increase its sales?

Accepted Answer

A)  $96,000. 
B)  $50,400. 
C)  $67,200. 
D)  $72,000.

Question 3

If sales decrease by 500 units in the next month,by how much would fixed expenses have to be reduced to maintain the current operating income?

Accepted Answer

A)  $7,500. 
B)  $6,000. 
C)  $2,000. 
D)  $3,000.

Question 4

What is the company's margin of safety percentage?

Accepted Answer

A)  25%. 
B)  20%. 
C)  40%. 
D)  10%.

Question 5

A company with sales of $80,000 and variable expenses of $40,000 should spend $12,000 on increased advertising,if the increased advertising will increase sales by $22,000.
CM ratio = 50% so incremental CM = 22,000 * .5 which is less than $12,000.

Accepted Answer

A) True 
 B)False

Question 6

Tanner Company's most recent contribution format income statement is presented below:  
The company sells its only product for $15 per unit.There were no beginning or ending inventories.
Required:
a)Compute the company's break-even point in units sold.
b)Compute the total variable expenses at the break-even point.
c)How many units would have to be sold to earn a target operating income of $9,000?
d)The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000.Would you advise the increased advertising outlay?

Accepted Answer

The answer of Tanner Company's most recent contribution format income...

Question 7

If sales decrease by 500 units in the next month,by how much would fixed expenses have to be reduced to maintain the current operating income?

Accepted Answer

A)  $7,500. 
B)  $6,000. 
C)  $2,000. 
D)  $3,000.

Question 8

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?

Accepted Answer

A)  37,500 units. 
B)  40,000 units. 
C)  65,000 units. 
D)  30,000 units.

Question 9

The following information relates to Clyde Corporation,which produced and sold 50,000 units last month. 
There were no beginning or ending inventories.Production and sales next month are expected to be 40,000 units.In the next month,what should the company's unit contribution margin be?

Accepted Answer

A)  $16.63. 
B)  $3.10. 
C)  $7.98. 
D)  $13.30.

Question 10

If the company wants its margin of safety to equal $35,000 next year,all other factors remaining the same,how many units will it need to sell?

Accepted Answer

A)  1,000 units. 
B)  833 units. 
C)  1,583 units. 
D)  1,833 units.

Question 11

If Total sales next month are $330,000 and Fletchers sales mix remains unchanged,the total sales for product C will be closest to:

Accepted Answer

A)  $100,000. 
B)  $110,000. 
C)  $82,500. 
D)  $137,500.

Question 12

What is the degree of operating leverage?

Accepted Answer

A)  3. 
B)  8. 
C)  0.33. 
D)  5.

Question 13

What is the break-even point in sales dollars,rounded to the nearest dollar?

Accepted Answer

A)  $148,148. 
B)  $266,667. 
C)  $333,333. 
D)  $350,000.

Question 14

In two companies making the same product and with the same total sales and total expenses,the contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses in its cost structure.

Accepted Answer

A) True 
 B)False

Question 15

Marling Corporation has budgeted the following data: 
What is the break-even in sales dollars?

Accepted Answer

A)  $400,000. 
B)  $420,000. 
C)  $540,000. 
D)  $660,000.

Question 16

Ostler Company's operating income last year was $10,000,and its contribution margin was $50,000.Using the operating leverage concept,if the company's sales increase next year by 8%,by what percentage can its operating income expect to increase?

Accepted Answer

A)  20%. 
B)  16%. 
C)  160%. 
D)  40%.

Question 17

A company has provided the following data: 
If the dollar contribution margin per unit is increased by 10%,total fixed cost is decreased by 20%,and all other factors remain the same,what will the outcome be for operating income?

Accepted Answer

A)  Increase by $61,000. 
B)  Increase by $20,000. 
C)  Increase by $3,500. 
D)  Increase by $11,000.

Question 18

What is the contribution margin ratio?

Accepted Answer

A)  12.5%. 
B)  33.0%. 
C)  25.0%. 
D)  37.5%.

Question 19

What is the company's contribution margin ratio?

Accepted Answer

A)  62.5%. 
B)  160%. 
C)  500%. 
D)  20%.

Question 20

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 operating income?

Accepted Answer

A)  $0. 
B)  $5. 
C)  $10. 
D)  $15.

Exam 4: Cost-Volume-Profit Relationships

If sales increase by 200 units,by how much should before-tax profits increase?

If the company wants to increase its total contribution margin by 40% in the next year,all other factors remaining the same,by how much will it need to increase its sales?

If sales decrease by 500 units in the next month,by how much would fixed expenses have to be reduced to maintain the current operating income?

What is the company's margin of safety percentage?

A company with sales of $80,000 and variable expenses of $40,000 should spend $12,000 on increased advertising,if the increased advertising will increase sales by $22,000. CM ratio = 50% so incremental CM = 22,000 * .5 which is less than $12,000.

If sales decrease by 500 units in the next month,by how much would fixed expenses have to be reduced to maintain the current operating income?

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield an operating income of $60,000?

The following information relates to Clyde Corporation,which produced and sold 50,000 units last month. There were no beginning or ending inventories.Production and sales next month are expected to be 40,000 units.In the next month,what should the company's unit contribution margin be?

If the company wants its margin of safety to equal $35,000 next year,all other factors remaining the same,how many units will it need to sell?

If Total sales next month are $330,000 and Fletchers sales mix remains unchanged,the total sales for product C will be closest to:

What is the degree of operating leverage?

What is the break-even point in sales dollars,rounded to the nearest dollar?

In two companies making the same product and with the same total sales and total expenses,the contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses in its cost structure.

Marling Corporation has budgeted the following data: What is the break-even in sales dollars?

Ostler Company's operating income last year was $10,000,and its contribution margin was $50,000.Using the operating leverage concept,if the company's sales increase next year by 8%,by what percentage can its operating income expect to increase?

A company has provided the following data: If the dollar contribution margin per unit is increased by 10%,total fixed cost is decreased by 20%,and all other factors remain the same,what will the outcome be for operating income?

What is the contribution margin ratio?

What is the company's contribution margin ratio?

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