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Exam 5: Cost-Volume-Profit Relationships

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Question 101

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The management of Casablanca Manufacturing Corporation believes that machine-hours is an appropriate measure of activity for overhead cost. Shown below are machine-hours and total overhead costs for the past six months: Assume that the relevant range includes all of the activity levels mentioned in this problem.If Casablanca expects to incur 185,000 machine hours next month, what will the estimated total overhead cost be using the high-low method? (Round your intermediate calculations to 2 decimal places.)

A) $212,750
B) $359,750
C) $382,750
D) $381,700

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

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Question 102

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Mcquage Corporation has provided its contribution format income statement for July. 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 19% increase in sales volume.

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a.Degree of operating leverage = Contrib...

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Question 103

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Sannella Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $991,000 per month. The company is currently selling 8,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $74,000 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 200 units. What should be the overall effect on the company's monthly net operating income of this change?

Junior Bodway, Incorporated, has provided the following budgeted data: How many units would the company have to sell in order to have a net operating income of $40,000?

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.

Bois Corporation has provided its contribution format income statement for January. If the company's sales volume increases by 7%, its net operating income should increase by about:

When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs.

Stauffer Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The variable expense ratio is closest to:

Bakan Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)

Sebree Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Using the degree of operating leverage, the estimated percent increase in net operating income as the result of a 5% increase in sales volume is closest to: (Round your intermediate calculations to 1 decimal place.)

Brihon Corporation produces and sells a single product. Data concerning that product appear below: Required: a. Assume the company's monthly target profit is $12,650. Determine the unit sales to attain that target profit.b. Assume the company's monthly target profit is $63,250. Determine the dollar sales to attain that target profit.

A tile manufacturer has supplied the following data: If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net operating income should be closest to: (Round your intermediate calculations to 2 decimal places.)

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.

Cobble Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $499,000 per month. The company is currently selling 5,000 units per month. The marketing manager would like to cut the selling price by $13 and increase the advertising budget by $33,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 900 units. What should be the overall effect on the company's monthly net operating income of this change?

Creswell Corporation's fixed monthly expenses are $29,000 and its contribution margin ratio is 56%. 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 $95,000?

Jorgenson Corporation has provided the following data for the first five months of the year: Using the least-squares regression method of analysis, the estimated monthly fixed component of lubrication cost is closest to:

The Stephens Leadership Center provides training seminars in personal development and time management. The company is relatively new and management is seeking information regarding the Center's cost structure. The following information has been gathered since the inception of the business in January of the current year: Required: a.Using the high-low method, estimate the variable cost per seminar and the total fixed cost per month. b. Using the least-squares method, estimate the variable cost per seminar and the total fixed cost per month.

Managers can use a variety of methods to estimate the fixed and variable components of a mixed cost. In account analysis, an account is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves.

Caraco Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 7,300 units is closest to: (Round your intermediate calculations to 2 decimal places.)

If fixed expenses increase by $10,000 per year, then the sales needed to break even will generally increase by more than $10,000.