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Exam 4: Cost-Volume-Profit Relationships

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Question 121

True/False

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On a CVP graph for a profitable company,the total revenue line will be steeper than the total expense line.

A) True
B) False

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Question 122

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Drake Company's contribution format income statement for the most recent year appears below: -If the company desires a net operating income of $20,000,the number of units needed to be sold is:

A) 28,500 units
B) 31,000 units
C) 31,750 units
D) 26,500 units

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

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Question 123

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Jackson Company's operating results for last year are given below: -If the company wants to increase its total contribution margin by 40% over last year,it will need to increase its sales by:

Data concerning Goulbourne Corporation's single product appear below: Fixed expenses are $444,000 per month.The company is currently selling 7,000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $2.Since the new component would improve the company's product,the marketing manager predicts that monthly sales would increase by 200 units.What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Arzola Corporation produces and sells a single product.Data concerning that product appear below: Required: Assume the company's monthly target profit is $17,080.Determine the unit sales to attain that target profit.Show your work!

Dampf Inc.has provided the following data concerning its only product: Required: Compute the margin of safety in both dollars and as a percentage of sales.

Darth Company sells three products.Sales and contribution margin ratios for the three products follow: Given these data,the contribution margin ratio for the company as a whole would be:

East Company has the following budgeted cost and revenue data: -A 10% increase in fixed expense would result in:

A manufacturer of cedar shingles has supplied the following data: -The company's contribution margin ratio is closest to:

Wright Corporation's contribution format income statement for last month appears below.There were no beginning or ending inventories. The company produced and sold 3,000 units during the month. -The company has an opportunity to secure a special order of 800 units if it is willing to drop the selling price on these units to $13.Costs of securing the special order would be $1,000.The special order would not affect the company's regular sales.If the special order is accepted,the company's overall net operating income will:

In the most recent month,Eckstrom Corporation's total contribution margin was $208,000 and its net operating income $39,400. 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 1% increase in sales.

Data concerning Lantieri Corporation's single product appear below: Fixed expenses are $162,000 per month.The company is currently selling 3,000 units per month. Required: The marketing manager believes that a $10,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change? Show your work!

Fjeld Corporation produces and sells two products.In the most recent month,Product C66G had sales of $20,000 and variable expenses of $7,200.Product U11T had sales of $19,000 and variable expenses of $8,400.And the fixed expenses of the entire company were $21,740.If the sales mix were to shift toward Product C66G with total dollar sales remaining constant,the overall break-even point for the entire company:

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

Bumpass Corporation's contribution margin ratio is 74% and its fixed monthly expenses are $43,000.Assume that the company's sales for July are expected to be $102,000. Required: Estimate the company's net operating income for July,assuming that the fixed monthly expenses do not change.Show your work!

Last year,Farrer Corporation had sales of $1,500,000,variable expenses of $900,000,and fixed expenses of $400,000.What would be the dollar sales at the break-even point?

Drake Company's contribution format income statement for the most recent year appears below: -The break-even point in sales dollars is:

The following monthly data in contribution format are available for the MN Company and its only product,Product SD: The company produced and sold 300 units during the month and had no beginning or ending inventories. Required: a.Without resorting to calculations,what is the total contribution margin at the break-even point? b.Management is contemplating the use of plastic gearing rather than metal gearing in Product SD.This change would reduce variable expenses by $18 per unit.The company's sales manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of 250 units per month.Should this change be made? c.Assume that MN Company is currently selling 300 units of Product SD per month.Management wants to increase sales and feels this can be done by cutting the selling price by $22 per unit and increasing the advertising budget by $20,000 per month.Management believes that these actions will increase unit sales by 50 percent.Should these changes be made? d.Assume that MN Company is currently selling 300 units of Product SD.Management wants to automate a portion of the production process for Product SD.The new equipment would reduce direct labor costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000.Management believes that the new equipment will increase the reliability of Product SD thus resulting in an increase in monthly sales of 12%.Should these changes be made?

Guillet Inc. produces and sells a single product. The selling price of the product is $180.00 per unit and its variable cost is $46.80 per unit. The fixed expense is $618,048 per month. -The break-even in monthly dollar sales is closest to:

The variable expense per unit is $12 and the selling price per unit is $40.Then the contribution margin ratio is 70%.