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Exam 2: Costvolumeprofit Relationships

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Question 21

True/False

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

A) True
B) False

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Question 22

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Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $24,000 and variable expenses of $6,480. Product Y45E had sales of $29,000 and variable expenses of $11,010. The fixed expenses of the entire company were $32,280. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

A) would decrease.
B) would increase.
C) could increase or decrease.
D) would not change.

E) A) and C)
F) A) and B)

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Question 23

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Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $42,550. If the sales mix were to shift toward Product B32L with total sales remaining constant, the overall break-even point for the entire company:

Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income.

Mancine Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. What is the break-even point in unit sales? b. Estimate how many units must be sold to achieve a target profit of $50,000.

A manufacturer of cedar shingles has supplied the following data: The company's degree of operating leverage is closest to:

Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product. If the company sells 9,700 units, its net operating income should be closest to:

Speckman Enterprises, Inc., produces and sells a single product whose selling price is $200.00 per unit and whose variable expense is $68.00 per unit. The company's monthly fixed expense is $514,800. Assume the company's target profit is $11,000. The unit sales to attain that target profit is closest to:

Houpe Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change?

Maziarz Corporation produces and sells a single product. Data concerning that product appear below: Assume the company's target profit is $16,000. The dollar sales to attain that target profit is closest to: (Round your intermediate calculations to 2 decimal places.)

A company that makes organic fertilizer has supplied the following data: The company's margin of safety in units is closest to: (Round per unit calculations to 2 decimal places.)

For a given level of sales, a low contribution margin ratio will produce more net operating income than a high contribution margin ratio.

Hawver Corporation produces and sells a single product. Data concerning that product appear below: Required: Assume the company's monthly target profit is $19,800. Determine the unit sales to attain that target profit. Show your work!

Mcdale 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 $18,460. The break-even point for the entire company is closest to:

Knezevich Corporation makes a product that sells for $230 per unit. The product's current sales are 36,900 units and its break-even sales are 32,103 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

The July contribution format income statement of Doxtater Corporation appears below: If the company's sales increase by 19%, its net operating income should increase by about: (Round your intermediate calculations to 2 decimal places.)

Data concerning Lemelin Corporation's single product appear below: The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month. The marketing manager believes that an $11,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

A manufacturer of premium wire strippers has supplied the following data: The company's degree of operating leverage is closest to:

Liz, Inc., produces and sells a single product. The product sells for $130.00 per unit and its variable expense is $48.10 per unit. The company's monthly fixed expense is $223,587. Required: Determine the monthly break-even in unit sales. Show your work!

Hedman Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The margin of safety percentage is closest to: