Question 1

All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

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?

Accepted Answer

A) $0.75 
B) $1.00 
C) $1.25 
D) $1.10

Question 3

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

Accepted Answer

A) $4.20 per unit 
B) $0.45 per unit 
C) $1.90 per unit 
D) $2.10 per unit

Question 4

Smee Inc.produces and sells a single product.The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit.The fixed expense is $281, 580 per month. The break-even in monthly dollar sales is closest to:

Accepted Answer

A) $281, 580 
B) $484, 943 
C) $703, 950 
D) $469, 300

Question 5

Mcallister Corporation has provided the following data concerning its only product:  What is the margin of safety in dollars?

Accepted Answer

A) $1, 256, 850 
B) $4, 728, 150 
C) $3, 990, 000 
D) $5, 985, 000

Question 6

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.
The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $30, 000 per month.The marketing manager predicts that these two changes would increase monthly sales by 1, 800 units.What should be the overall effect on the company's monthly net operating income of this change?

Accepted Answer

A) decrease of $25, 200 
B) increase of $254, 400 
C) increase of $70, 800 
D) decrease of $70, 800

Question 7

Alpha Corporation reported the following data for its most recent year: sales, $500, 000;variable expenses, $300, 000;and fixed expenses, $150, 000.The company's degree of operating leverage is:

Accepted Answer

A) 10 
B) 2 
C) 4 
D) 2.5

Question 8

Holdt Inc.produces and sells a single product.The selling price of the product is $230.00 per unit and its variable cost is $66.70 per unit.The fixed expense is $212, 290 per month.The break-even in monthly unit sales is closest to:

Accepted Answer

A) 1, 300 
B) 3, 183 
C) 1, 802 
D) 923

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Darwin Inc.sells a particular textbook for $20.Variable expenses are $14 per book.At the current volume of 50, 000 books sold per year the company is just breaking even.Given these data, the annual fixed expenses associated with the textbook total:

Accepted Answer

A) $300, 000 
B) $1, 000, 000 
C) $1, 300, 000 
D) $700, 000

Question 11

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

Accepted Answer

A) 819 
B) 2, 214 
C) 1, 300 
D) 1, 444

Question 12

Callicott Corporation produces a product that sells for $120 per unit.The product's current sales are 25, 400 units and its break-even sales are 18, 542 units. The margin of safety as a percentage of sales is closest to:

Accepted Answer

A) 27% 
B) 37% 
C) 63% 
D) 73%

Question 13

Gilpatric Corporation produces and sells two products.In the most recent month, Product Q71M had sales of $28, 000 and variable expenses of $7, 840.Product V04P had sales of $49, 000 and variable expenses of $27, 580.The fixed expenses of the entire company were $34, 630. The break-even point for the entire company is closest to:

Accepted Answer

A) $70, 050 
B) $64, 130 
C) $34, 630 
D) $42, 370

Question 14

A company that makes organic fertilizer has supplied the following data:  The company's degree of operating leverage is closest to:

Accepted Answer

A) 1.97 
B) 15.54 
C) 1.25 
D) 7.48

Question 15

Bolding Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $42, 000.Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $126, 000?

Accepted Answer

A) $76, 860 
B) $7, 140 
C) $34, 860 
D) $84, 000

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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.
The marketing manager would like to introduce sales commissions as an incentive for the sales staff.The marketing manager has proposed a commission of $8 per unit.In exchange, the sales staff would accept a decrease in their salaries of $27, 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 100 units.What should be the overall effect on the company's monthly net operating income of this change?

Accepted Answer

A) decrease of $1, 000 
B) decrease of $55, 000 
C) increase of $26, 200 
D) increase of $191, 000

Question 18

The contribution margin ratio is equal to:

Accepted Answer

A) Total manufacturing expenses/Sales. 
B) (Sales - Variable expenses)/Sales. 
C) 1 - (Gross Margin/Sales). 
D) 1 - (Contribution Margin/Sales).

Question 19

Data concerning Kurek Corporation's single product appear below:  Fixed expenses are $190, 000 per month.The company is currently selling 4, 000 units per month.
Required:
The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $11, 100 per month.The marketing manager predicts that these two changes would increase monthly sales by 1, 500 units.What should be the overall effect on the company's monthly net operating income of this change? Show your work!

Accepted Answer

The answer of Data concerning Kurek Corporation's single product appear...

Question 20

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

Accepted Answer

A) $310, 860 
B) $1, 195, 920 
C) $420, 200 
D) $642, 400

Exam 2: Cost-Volume-Profit Relationships

All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.

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?

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

Smee Inc.produces and sells a single product.The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit.The fixed expense is $281, 580 per month. The break-even in monthly dollar sales is closest to:

Mcallister Corporation has provided the following data concerning its only product: What is the margin of safety in dollars?

Alpha Corporation reported the following data for its most recent year: sales, $500, 000;variable expenses, $300, 000;and fixed expenses, $150, 000.The company's degree of operating leverage is:

Holdt Inc.produces and sells a single product.The selling price of the product is $230.00 per unit and its variable cost is $66.70 per unit.The fixed expense is $212, 290 per month.The break-even in monthly unit sales is closest to:

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.

Darwin Inc.sells a particular textbook for $20.Variable expenses are $14 per book.At the current volume of 50, 000 books sold per year the company is just breaking even.Given these data, the annual fixed expenses associated with the textbook total:

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

Callicott Corporation produces a product that sells for $120 per unit.The product's current sales are 25, 400 units and its break-even sales are 18, 542 units. The margin of safety as a percentage of sales is closest to:

A company that makes organic fertilizer has supplied the following data: The company's degree of operating leverage is closest to:

Bolding Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $42, 000.Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $126, 000?

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 contribution margin ratio is equal to:

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