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Exam 4: Cost-Volume-Profit Relationships

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Question 61

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Seyal Inc.'s contribution margin ratio is 55% and its fixed monthly expenses are $34,000.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 $94,000?

A) $17,700
B) $60,000
C) $8,300
D) $51,700

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

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Question 62

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Hurst Co.manufacturers and sells a single product.Price and cost data regarding this product are as follows: -In the current year,the company sold 43,000 units.Due to competition,management will be forced to lower the selling price by 10% next year.How many units must be sold next year to earn the same income as was earned in the current year?

A) 50,000 units
B) 53,200 units
C) 58,800 units
D) 60,200 units

E) A) and D)
F) None of the above

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Question 63

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The contribution margin ratio of Lukasiewicz Corporation's only product is 62%.The company's monthly fixed expense is $297,600 and the company's monthly target profit is $37,200. Required: Determine the dollar sales to attain the company's target profit.Show your work!

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

Vandinter Corporation produces and sells a single product.Data concerning that product appear below: -The break-even in monthly unit sales is closest to:

Austin Manufacturing had the following operating data for the year just ended. Management plans to improve the quality of its only product by: (1) replacing a component that costs $3.50 with a higher-grade component that costs $5.50;and (2) renting a packing machine for $18,000 a year.If the desired target profit is $288,000,the company must sell:

Dorian Company produces and sells a single product.The product sells for $60 per unit and has a contribution margin ratio of 40%.The company's monthly fixed expenses are $28,800. -If Dorian Company desires a monthly net operating income equal to 10% of sales,monthly sales will have to be:

Assuming that the unit sales are unchanged,the total contribution margin will decrease if:

Sullens Inc,which produces and sells a single product,has provided its contribution format income statement for July. -If the company sells 8,300 units,its net operating income should be closest to:

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

Slosh Cleaning Corporation services both residential and commercial customers.Slosh expects the following operating results next year for each type of customer: Slosh expects to have $18,000 in fixed expenses next year.What would Slosh's total dollar sales have to be next year in order to generate a profit of $90,000?

Lineman Corporation sells a product for $230 per unit.The product's current sales are 23,400 units and its break-even sales are 20,124 units. What is the margin of safety in dollars?

A contribution approach income statement can usually be easily prepared from the information contained in a corporation's published income statement.

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

A company that makes organic fertilizer has supplied the following data: -The company's margin of safety in units is closest to:

The following data pertain to last month's operations: The break-even point in dollar sales is:

Once the break-even point is reached:

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 profit 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?

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories.A total of 20,000 units were produced and sold last month. -What is the company's break-even in units?

Zents Inc.produces and sells a single product.The selling price of the product is $240.00 per unit and its variable cost is $108.00 per unit.The fixed expense is $407,880 per month. The break-even in monthly dollar sales is closest to: