Accounting Ch. 5 Multiple Choice

131 terms by Marco714

Create a new folder

Advertisement Upgrade to remove ads

The difference between total sales in dollars and total variable expenses is called:
A. net operating income.
B. net profit.
C. the gross margin.
D. the contribution margin.

D. the contribution margin.

With regard to the CVP graph, which of the following statements is not correct?
A. The CVP graph assumes that volume is the only factor affecting total cost.
B. The CVP graph assumes that selling prices do not change.
C. The CVP graph assumes that variable costs go down as volume goes up.
D. The CVP graph assumes that fixed expenses are constant in total within the relevant range.

C. The CVP graph assumes that variable costs go down as volume goes up.

East Company manufactures and sells a single product with a positive contribution margin. If
the selling price and the variable expense per unit both increase 5% and fixed expenses do not
change, what is the effect on the contribution margin per unit and the contribution margin ratio?
A. Option A
B. Option B
C. Option C
D. Option D

C. Option C

Which of the following formulas is used to calculate the contribution margin ratio?
A. (Sales - Fixed expenses) ÷ Sales
B. (Sales - Cost of goods sold) ÷ Sales
C. (Sales - Variable expenses) ÷ Sales
D. (Sales - Total expenses) ÷ Sales

C. Sales - Variable expenses) ÷ Sales

Brasher Company manufactures and sells a single product that has a positive contribution margin.
If the selling price and variable expenses both decrease by 5% and fixed expenses do not change,
then what would be the effect on the contribution margin per unit and the contribution margin ratio?
A. Option A
B. Option B
C. Option C
D. Option D

B. Option B

The break-even point in unit sales is found by dividing total fixed expenses by:
A. the contribution margin ratio.
B. the variable expenses per unit.
C. the sales price per unit.
D. the contribution margin per unit.

D. the contribution margin per unit.

Break-even analysis assumes that:
A. total costs are constant.
B. the average fixed expense per unit is constant.
C. the average variable expense per unit is constant.
D. variable expenses are nonlinear.

C. the average variable expense per unit is constant.

If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is
the fixed expense, then the break-even point in units is:
A. Q ÷ (P-V).
B. F ÷ (P-V).
C. V ÷ (P-V).
D. F ÷ [Q(P-V)].

B. F ÷ (P-V).

The break-even point in unit sales increases when variable expenses:
A. increase and the selling price remains unchanged.
B. decrease and the selling price remains unchanged.
C. decrease and the selling price increases.
D. remain unchanged and the selling price increases.

A. increase and the selling price remains unchanged

The margin of safety percentage is computed as:
A. Break-even sales ÷ Total sales.
B. Total sales - Break-even sales.
C. (Total sales - Break-even sales) ÷ Break-even sales.
D. (Total sales - Break-even sales) ÷ Total sales.

D. (Total sales - Break-even sales) ÷ Total sales

The amount by which a company's sales can decline before losses are incurred is called the:
A. contribution margin.
B. degree of operating leverage.
C. margin of safety.
D. contribution margin ratio.

C. margin of safety

The degree of operating leverage can be calculated as:
A. contribution margin divided by sales.
B. gross margin divided by net operating income.
C. net operating income divided by sales.
D. contribution margin divided by net operating income.

D. contribution margin divided by net operating income.

All other things the same, which of the following would be true of the contribution margin and variable
expenses of a company with high fixed costs and low variable costs as compared to a company with low
fixed costs and high variable costs?
A. Option A
B. Option B
C. Option C
D. Option D

C. Option C

A company has provided the following data:
If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors
remain the same, net operating income will:
A. decrease by $31,875.
B. decrease by $15,000.
C. increase by $20,625.
D. decrease by $3,125.

A. decrease by $31,875.

Butteco Corporation has provided the following cost data for last year when 100,000 units were produced
and sold:
All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and
administrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit,
the net operating income from producing and selling 110,000 units would be:
A. $450,000
B. $385,000
C. $405,000
D. $560,000

C. $405,000

Menlove Company had the following income statement for the most recent
year:
Given this data, the unit contribution margin was:
A. $2 per unit
B. $15 per unit
C. $6 per unit
D. $4 per unit

C. $6 per unit

The following information relates to Clyde Corporation which produced and sold 50,000 units last
month.
There were no beginning or ending inventories. Production and sales next month are expected to be
40,000 units. The company's unit contribution margin next month should be:
A. $16.63
B. $3.10
C. $7.98
D. $13.30

D. $13.30

Mancuso Corporation has provided its contribution format income statement for January. The company
produces and sells a single product.
If the company sells 3,100 units, its total contribution margin should be closest to:
A. $27,045
B. $181,000
C. $162,400
D. $173,600

D. $173,600

Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution
format income statement for July.
If the company sells 6,900 units, its net operating income should be closest to:
A. $35,979
B. $34,500
C. $36,500
D. $32,000

B. $34,500

Sensabaugh Inc., a company that produces and sells a single product, has provided its contribution format
income statement for January.
If the company sells 1,600 units, its total contribution margin should be closest to:
A. $22,200
B. $28,800
C. $4,800
D. $32,400

B. $28,800

Gaudy Inc. produces and sells a single product. The company has provided its contribution format income
statement for May.
If the company sells 4,300 units, its net operating income should be closest to:
A. $7,700
B. $25,513
C. $26,700
D. $19,500

D. $19,500

The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000.
To obtain a target net operating income of $60,000, sales would have to be:
A. $260,000
B. $440,000
C. $280,000
D. $240,000

B. $440,000

The contribution margin ratio is 30% for the Honeyville Company and the break-even point in sales is
$150,000. If the company's target net operating income is $60,000, sales would have to be:
A. $200,000
B. $350,000
C. $250,000
D. $210,000

B. $350,000

Rothe Company manufactures and sells a single product that it sells for $90 per unit and has a
contribution margin ratio of 35%. The company's fixed expenses are $46,800. If Rothe desires a
monthly target net operating income equal to 15% of sales, the amount of sales in units will have to be
(rounded):
A. 1,486 units
B. 3,467 units
C. 1,040 units
D. 2,600 units

D. 2,600 units

The Herald Company manufactures and sells a single product which sells for $50 per unit and has a
contribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desires
a monthly target net operating income equal to 20% of sales dollars, sales in units will have to be
(rounded):
A. 2,500 units
B. 5,000 units
C. 1,666 units
D. 1,000 units

B. 5,000 units

Street Company's fixed expenses total $150,000, its variable expense ratio is 60% and its variable
expenses are $4.50 per unit. Based on this information, the break-even point in units is:
A. 50,000 units
B. 37,500 units
C. 33,333 units
D. 100,000 units

A. 50,000 units

South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed
expenses total $9,600, the break-even point will be:
A. $24,000
B. $14,400
C. $9,600
D. $16,000

A. $24,000

Turner Company's contribution margin ratio is 15%. If the degree of operating leverage is 12 at the
$150,000 sales level, net operating income at the $150,000 sales level must equal:
A. $1,500
B. $2,700
C. $2,160
D. $1,875

D. $1,875

Patterson Company's variable expenses are 55% of sales. At a $400,000 sales level, the degree of
operating leverage is 5. If sales increase by $30,000, the new degree of operating leverage will be
(rounded):
A. 5.00
B. 3.18
C. 2.91
D. 3.91

D. 3.91

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:
A. 25%
B. 75%
C. 33.3%
D. it is impossible to determine from the data given.

A. 25%

Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses
total $35,000 per period. By how much will net operating income change if sales are expected to increase
by $40,000?
A. $16,000 increase
B. $5,000 increase
C. $24,000 increase
D. $11,000 decrease

A. $16,000 increase

Knoke Corporation's contribution margin ratio is 29% and its fixed monthly expenses are $17,000. If
the company's sales for a month are $98,000, what is the best estimate of the company's net operating
income? Assume that the fixed monthly expenses do not change.
A. $81,000
B. $11,420
C. $52,580
D. $28,420

B. $11,420

Balonek Inc.'s contribution margin ratio is 57% and its fixed monthly expenses are $41,000. 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 $112,000?
A. $63,840
B. $7,160
C. $71,000
D. $22,840

D. $22,840

Danneman Corporation's fixed monthly expenses are $13,000 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 $41,000?
A. $9,960
B. $5,040
C. $22,960
D. $28,00o

A. $9,960

Sinclair Company's single product has a selling price of $25 per unit. Last year the company reported a
profit of $20,000 and variable expenses totaling $180,000. The product has a 40% contribution margin
ratio. Because of competition, Sinclair Company will be forced in the current year to reduce its selling
price by $2 per unit. How many units must be sold in the current year to earn the same profit as was
earned last year?
A. 15,000 units
B. 12,000 units
C. 16,500 units
D. 12,960 units

A. 15,000 units

Pool Company's variable expenses are 36% of sales. Pool is contemplating an advertising campaign
that will cost $20,000. If sales increase by $80,000, the company's net operating income should increase
by:
A. $28,800
B. $64,000
C. $8,800
D. $31,200

D. $31,200

Loren Company's single product has a selling price of $15 per unit. Last year the company reported total
variable expenses of $180,000, fixed expenses of $90,000, and a net operating income of $30,000. A
study by the sales manager discloses that a 15% increase in the selling price would reduce unit sales by
10%. If her proposal is adopted, net operating income would:
A. increase by $45,000
B. increase by $37,500
C. increase by $7,500
D. increase by $28,500

D. increase by $28,500

Data concerning Runnells Corporation's single product appear
below:
The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per month. The
marketing manager believes that a $7,000 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. Increase of $8,000
B. Increase of $1,000
C. Decrease of $7,000
D. Decrease of $1,000

B. Increase of $1,000

Weinreich Corporation produces and sells a single product. Data concerning that product appear
below:
The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per month. The
marketing manager believes that an $18,000 increase in the monthly advertising budget would result in
a 170 unit increase in monthly sales. What should be the overall effect on the company's monthly net
operating income of this change?
A. Increase of $2,700
B. Increase of $15,300
C. Decrease of $18,000
D. Decrease of $2,700

D. Decrease of $2,700

Data concerning Lancaster Corporation's single product appear
below:
Fixed expenses are $105,000 per month. The company is currently selling 1,000 units per month.
Management is considering using a new component that would increase the unit variable cost by $44.
Since the new component would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 400 units. What should be the overall effect on the
company's monthly net operating income of this change?
A. Decrease of $38,400
B. Decrease of $5,600
C. Increase of $5,600
D. Increase of $38,400

B. Decrease of $5,600

Ribb Corporation produces and sells a single product. Data concerning that product appear
below:
Fixed expenses are $913,000 per month. The company is currently selling 9,000 units per month.
Management is considering using a new component that would increase the unit variable cost by $6.
Since the new component would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 400 units. What should be the overall effect on the
company's monthly net operating income of this change?
A. Decrease of $3,200
B. Increase of $50,800
C. Decrease of $50,800
D. Increase of $3,200

A. Decrease of $3,200

Data concerning Moscowitz Corporation's single product appear
below:
Fixed expenses are $375,000 per month. The company is currently selling 8,000 units per month. The
marketing manager would like to cut the selling price by $15 and increase the advertising budget by
$23,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 3,100 units. What should be the overall effect on the company's monthly net operating income of this
change?
A. Decrease of $128,900
B. Increase of $426,500
C. Increase of $8,900
D. Increase of $128,900

C. Increase of $8,900

Montgomery Corporation produces and sells a single product. Data concerning that product appear
below:
Fixed expenses are $239,000 per month. The company is currently selling 3,000 units per month. The
marketing manager would like to cut the selling price by $12 and increase the advertising budget by
$12,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 500 units. What should be the overall effect on the company's monthly net operating income of this
change?
A. Increase of $102,000
B. Decrease of $30,000
C. Decrease of $6,000
D. Increase of $30,000

C.Decrease of $6,000

Data concerning Knipp Corporation's single product appear
below:
Fixed expenses are $587,000 per month. The company is currently selling 4,000 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 $16 per unit. In exchange, the sales staff would accept
a decrease in their salaries of $57,000 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?
A. Increase of $55,400
B. Increase of $745,800
C. Increase of $9,800
D. Iecrease of $104,200

C. Increase of $9,800

Mowrer Corporation produces and sells a single product. Data concerning that product appear
below:
Fixed expenses are $567,000 per month. The company is currently selling 9,000 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 $84,000 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 600
units. What should be the overall effect on the company's monthly net operating income of this change?
A. Increase of $77,400
B. Increase of $21,600
C. Increase of $669,600
D. Decrease of $146,400

B. Increase of $21,600

Hirt Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000
and variable expenses are expected to be $8 per unit. How many units must the company sell to generate
net operating income of $80,000?
A. 50,000 units
B. 120,000 units
C. 60,000 units
D. 100,000 units

B. 120,000 units

A total of 30,000 units were sold last year. The contribution margin per unit was $2, and fixed expenses
totaled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the
contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn
the same profit as was earned last year?
A. 23,000 units
B. 43,000 units
C. 30,000 units
D. 13,000 units

B. 43,000 units

A product sells for $20 per unit and has a contribution margin ratio of 40 percent. Fixed expenses total
$240,000 annually. How many units of the product must be sold to yield a profit of $60,000?
A. 37,500 units
B. 40,000 units
C. 65,000 units
D. 30,000 units

A. 37,500 units

Last year, Flynn Company reported a profit of $70,000 when sales totaled $520,000 and the contribution
margin ratio was 40%. If fixed expenses increase by $10,000 next year, what amount of sales will be
necessary in order for the company to earn a profit of $80,000?
A. $600,000
B. $570,000
C. $562,500
D. $625,000

B. $570,000

Perona Corporation produces and sells a single product. Data concerning that product appear
below:
The unit sales to attain the company's monthly target profit of $9,000 is closest to:
A. 5,601 units
B. 4,400 units
C. 2,464 units
D. 4,155 units

B. 4,400 units

Data concerning Hewell Enterprises Corporation's single product appear
below:
The unit sales to attain the company's monthly target profit of $14,000 is closest to:
A. 4,408 units
B. 8,186 units
C. 5,153 units
D. 2,865 units

A. 4,408 units

Lone International Corporation's only product sells for $230.00 per unit and its variable expense is
$80.50. The company's monthly fixed expense is $822,250 per month. The unit sales to attain the
company's monthly target profit of $33,000 is closest to:
A. 3,718 units
B. 6,688 units
C. 10,624 units
D. 5,721units

D. 5,721units

Hassick Corporation produces and sells a single product whose contribution margin ratio is 63%. The
company's monthly fixed expense is $460,530 and the company's monthly target profit is $19,000. The
dollar sales to attain that target profit is closest to:
A. $290,134
B. $302,104
C. $761,159
D. $731,000

C.$761,159

The contribution margin ratio of Lime Corporation's only product is 75%. The company's monthly fixed
expense is $688,500 and the company's monthly target profit is $20,000. The dollar sales to attain that
target profit is closest to:
A. $531,375
B. $944,667
C. $918,000
D. $516,375

B. $944,667

The following is last month's contribution format income
statement:
What is the company's margin of safety percentage to the nearest whole percent?
A. 42%
B. 40%
C. 17%
D. 20%

B. 40%

The following monthly data are available for the Eager Company and its only
product:
The margin of safety for the company for March was:
A. $315,000
B. $225,000
C. $135,000
D. $495,000

B. $225,000

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?
A. $1,300,000
B. $1,000,000
C. $1,380,000
D. $1,200,000

B. $1,000,000

Smith Company sells a single product at a selling price of $30 per unit. Variable expenses are $12 per
unit and fixed expenses are $41,400. Smith's break-even point is:
A. 1,380 units
B. 2,300 units
C. 3,450 units
D. 6,900 units

B. 2,300 units

The following data pertain to last month's
operations:
The break-even point in dollars is:
A. $300,000
B. $240,000
C. $200,000
D. $160,000

B. $240,000

Rider Company sells a single product. The product has a selling price of $40 per unit and variable
expenses of $15 per unit. The company's fixed expenses total $30,000 per year. The company's breakeven
point in terms of total dollar sales is:
A. $100,000
B. $80,000
C. $60,000
D. $48,000

D. $48,000

The following is last month's contribution format income
statement:
What is the company's break-even in sales dollars?
A. $1,200,000
B. $0
C. $1,800,000
D. $1,600,000

A. 1,200,000

Rave Corporation produces and sells a single product. Data concerning that product appear
below:
The break-even in monthly unit sales is closest to:
A. 2,844 units
B. 3,620 units
C. 3,210 units
D. 1,701 units

C. 3,210 units

Data concerning Odum Corporation's single product appear
below:
The break-even in monthly unit sales is closest to:
A. 1,413 units
B. 1, 110 units
C. 622 units
D. 1,048 units

B. 1, 110 units

Moncrief Inc. produces and sells a single product. The selling price of the product is $170.00 per unit and
its variable cost is $62.90 per unit. The fixed expense is $300,951 per month. The break-even in monthly
unit sales is closest to:
A. 4,785 units
B. 2,810 units
C. 3,122 units
D. 1,770 units

B.2,810 units

Shiraki Corporation produces and sells a single product. Data concerning that product appear
below:
The break-even in monthly dollar sales is closest to:
A. $650,000
B. $687,722
C. $396,500
D. $1,016,667

A. $650,000

Data concerning Carlo Corporation's single product appear
below:
The break-even in monthly dollar sales is closest to:
A. $896,744
B. $466,900
C. $1,556,333
D. $667,000

D. $667,000

Zumpano Inc. produces and sells a single product. The selling price of the product is $170.00 per unit and
its variable cost is $73.10 per unit. The fixed expense is $125,001 per month.
The break-even in monthly dollar sales is closest to:
A. $211,667
B. $125,001
C. $290,700
D. $219,300

D. $219,300

The following information pertains to Clove Co.:
Clove's margin of safety is:
A. $300,000
B. $400,000
C. $500,000
D. $800,000

A. $300,000

Olis Corporation sells a product for $130 per unit. The product's current sales are 28,900 units and its
break-even sales are 25,721 units. What is the margin of safety in dollars?
A. $413,270
B. $3,343,730
C. $2,504,667
D. $3,757,000

A. $413,270

Puchalla Corporation sells a product for $230 per unit. The product's current sales are 13,400 units and its
break-even sales are 10,720 units. The margin of safety as a percentage of sales is closest to:
A. 20%
B. 25%
C. 80%
D. 75%

A. 20%

Sturrock Corporation has provided the following data concerning its only
product:
What is the margin of safety in dollars?
A. $5,122,000
B. $4,558,580
C. $3,414,667
D. $563,420

D. $563,420

Victorin Corporation has provided the following data concerning its only
product:
The margin of safety as a percentage of sales is closest to:
A. 19%
B. 77%
C. 23%
D. 81%

A. 19%

Kendall Company has sales of 1,000 units at $60 a unit. Variable expenses are 30% of the selling price. If
total fixed expenses are $30,000, the degree of operating leverage is:
A. 1.50
B. 5.00
C. 1.67
D. 3.50

D. 3.50

At a sales level of $90,000, Blue Company's contribution margin is $24,000. If the degree of operating
leverage is 6 at a $90,000 sales level, net operating income must equal:
A. $15,000
B. $11,000
C. $4,000
D. $20,000

C. $4,000

The January contribution format income statement of Brotherton Corporation appears
below:
The degree of operating leverage is closest to:
A. 6.26
B. 0.27
C. 0.16
D. 3.64

D. 3.64

Lagasca Corporation's contribution format income statement for December appears
below:
The degree of operating leverage is closest to:
A. 10.56
B. 0.21
C. 4.69
D. 0.09

C. 4.69

Sperberg Corporation's operating leverage is 3.7. If the company's sales increase by 12%, its net operating
income should increase by about:
A. 44.4%
B. 3.7%
C. 12.0%
D. 30.8%

A.44.4%

Tanigawa Inc. has an operating leverage of 8.7. If the company's sales increase by 8%, its net operating
income should increase by about:
A. 69.6%
B. 8.7%
C. 108.8%
D. 8.0%

A. 69.6%

The following monthly data are available for the W.K. Kent
Company:
The break-even sales for the month for the company are closest to:
A. $170,089
B. $189,200
C. $139,164
D. $127,567

B. $189,200

Rickers 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 $38,940. The break-even point for the entire company is
closest to:
A. $80,590
B. $76,353
C. $38,940
D. $46,060

B. $76,353

Balbuena Corporation produces and sells two products. Data concerning those products for the most
recent month appear below:
The fixed expenses of the entire company were $15,630. If the sales mix were to shift toward
Product K87W with total sales dollars remaining constant, the overall break-even point for the entire
company:
A. would not change.
B. would increase.
C. would decrease.
D. could increase or decrease

C. would decrease.

Mounts Corporation produces and sells two products. In the most recent month, Product I05L had sales of
$32,000 and variable expenses of $10,880. Product P42T had sales of $45,000 and variable expenses of
$18,380. And the fixed expenses of the entire company were $46,070. The break-even point for the entire
company is closest to:
A. $30,930
B. $75,330
C. $74,306
D. $46,070

C. $74,306

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

C. would decrease.

The following data pertain to Epsom Corporation's operations:
-The variable expense per unit is:
-:The break-even level in sales dollars is:
-Net operating income at sales of 12,000 units is:

Variable Expense: D. $15.00 per unit
Break-even sales: A. $210,000
NOI: Net operating income at sales of 12,000 units is:

A cement manufacturer has supplied the following data:
-What is the company's unit contribution margin
-The company's contribution margin ratio is closest to:
-If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net
operating income should be closest to:

Unit CM: D. $2.30
CM Ratio: B. 53.5%
Increase in unit sales 3%: B. $99,940

A tile manufacturer has supplied the following data:
-What is the company's unit contribution margin?
-The company's contribution margin ratio is closest to:
-If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net
operating income should be closest to:

CM: C. $2.15
CM Ratio: C. 45.7%
Increase in unit sales: C. $115,480

Drake Company's contribution format income statement for the most recent year appears below:
The unit contribution margin is:
The break-even point in sales dollars is:
If the company desires a net operating income of $20,000, the number of units needed to be sold is:

Unit CM: B. $8
Break Even Point: A. $731,250
Desires a NOI $20,000: C. 31,750 units

Drake Corporation Continued:
The sales manager is convinced that a $60,000 expenditure on advertising will increase unit sales by 50%
without any other increase in fixed expenses. If the sales manager is correct, the company's net operating
income would increase by:
A. $44,000
B. $34,000
C. $30,000
D. $49,000

A. $44,000

The following data were supplied by Reader Corporation:
-The contribution margin is:
-The break-even point in sales dollars is:

CM: D. $180,000
Break Even: A. $470,000

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

Margin of Safety: D. 194,043 units
CM: D. $2.35
Operating Leverage: A. 3.50

Weiss Corporation produces two models of wood chairs, Colonial and Early American. The Colonial
sells for $60 per chair and the Early American sells for $80 per chair. Variable expenses for each model
are as follows:
-The contribution margin per chair for the Colonial model is:
-If the sales mix and sales units are as expected, the break-even in sales dollars is closest to:

CM:B. $16
Break even:C. $143,000

Starwalt Corporation produces and sells a single product. The company has provided its contribution
format income statement for March
-If the company sells 7,900 units, its total contribution margin should be closest to:
-If the company sells 7,300 units, its net operating income should be closest to:

CM: C. $316,000
NOI: C. $59,100

Pedulla Inc, which produces and sells a single product, has provided its contribution format income
statement for February.
-If the company sells 2,100 units, its total contribution margin should be closest to:
-If the company sells 2,900 units, its net operating income should be closest to:

CM: A. $90,300
NOI: B. $44,800

The following is Allison Corporation's contribution format income statement for last month:
The company has no beginning or ending inventories. The company produced and sold 10,000 units last
month.

CM: A. 62.5%
Sales:B. $640,000
Increase in sales: D. $10,000
Target profit 120,000: C. 10,400 units
Margin of Safety: B. 20%
Operating leverage: 5.0

Evergreen Corp. has provided the following data:
-The contribution margin ratio is:
-The margin of safety percentage is:
-The number of units needed to achieve a target net operating income of $49,500 would be:

CM Ratio: B. 45%
Margin of Safety: C. 55.0%
NOI: C. 3,200 units

Paxton Corp has provided the following data concerning its operations last month:
Paxton Corp is a retailing organization.
The operating leverage is:
-The contribution margin ratio is:
-The break-even sales in dollars is (round to the nearest dollar):

Operating Leverage: A. 3
CM %: D. 37.5%
Break even: B. $266,667

A manufacturer of cedar shingles has supplied the following data:

-The company's break-even:C. 226,866 bundles
-The company's CM: C. 41.4%
-The company's operating leverage: A. 7.85

A manufacturer of tiling grout has supplied the following data:

-The company's break-even: D. 464,865 kilograms
-The company's CM: A. 46.3%
-The company's operating leverage: C. 4.00

Southwest Industries produces a sports glove that sells for $15 per pair. Variable expenses are $8 per pair
and fixed expenses are $35,000 annually.
Break even/ CM%?

Break even: B. 5,000 pairs
CM%: A. 46.7%

Mark Corporation produces two models of calculators. The Business model sells for
$60, and the Math model sells for $40. The variable expenses are given below:
CM/Break Even?

CM: D. 60%
Break Even: B. 1,667 Business Model and 833 Math Model

Gardner Furniture Company produces two kinds of chairs: an oak model and a chestnut wood model.
The oak model sells for $60 and the chestnut wood model sells for $100.
Break Even, CM%

Break Even: B. $300,000
CM%: B. 45%

East Company has the following budgeted cost and revenue data:
NOI/ 10% Fixed expense?

NOI: D. 15,750 units
Fixed expense:D. an increase in the break-even point.

Jackson Company's operating results for last year are given below:
Increase in CM 40%/ change in break even

CM:C. $38,400
Break even: C. 150 unit decrease

Madengrad Company manufactures a single product called a densimeter. This product is a density
monitoring device attached to large industrial mixing machines used in flour, rubber, petroleum, and
chemical manufacturing. A densimeter sells for $900 per unit. The following variable expenses are
NOI loss/ Sales Volume?

NOI Loss: A. $(4,200,000)
Sales Volume: A. 22,000 units

Wright Corporation's contribution format income statement for last month appears below.
Sales Decrease/ NOI?

Sales Decrease 500: D. $3,000
NOI: B. Increase by $2,200

This question is to be considered independently of all other questions relating to Robledo Corporation.
Refer to the original data when answering this question.
The marketing manager believes that a $7,000 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. Decrease of $1,000
B. Decrease of $7,000
C. Increase of $1,000
D. Increase of $8,000

C. Increase of $1,000

This question is to be considered independently of all other questions relating to Robledo Corporation.
Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit variable cost by $3.
Since the new component would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 400 units. What should be the overall effect on the
company's monthly net operating income of this change?
A. Decrease of $30,800
B. Decrease of $3,800
C. Increase of $30,800
D. Increase of $3,800

D. Increase of $3,800

This question is to be considered independently of all other questions relating to Robledo Corporation.
Refer to the original data when answering this question.
The marketing manager would like to cut the selling price by $6 and increase the advertising budget by
$46,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 800 units. What should be the overall effect on the company's monthly net operating income of this
change?
A. Increase of $13,200
B. Increase of $29,200
C. Decrease of $13,200
D. Decrease of $40,800

D. Decrease of $40,800

This question is to be considered independently of all other questions relating to Robledo 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 $57,000 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?
A. Increase of $56,200
B. Decrease of $121,800
C. Increase of $712,200
D. Decrease of $7,800

D. Decrease of $7,800

Homme Corporation: Management is considering using a new component that would increase the unit variable cost by $16.
Since the new component would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 500 units. What should be the overall effect on the
company's monthly net operating income of this change?
A. Increase of $2,000
B. Decrease of $2,000
C. Decrease of $30,000
D. Increase of $30,000

B. Decrease of $2,000

Homme Corporation: Refer to the original data when answering this question.
The marketing manager believes that a $12,000 increase in the monthly advertising budget would result
in a 190 unit increase in monthly sales. What should be the overall effect on the company's monthly net
operating income of this change?
A. Increase of $2,440
B. Decrease of $12,000
C. Increase of $14,440
D. Decrease of $2,440

A. Increase of $2,440

Homme Corporation: The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The
marketing manager has proposed a commission of $14 per unit. In exchange, the sales staff would accept
a decrease in their salaries of $24,000 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?
A. Decrease of $45,800
B. Increase of $154,200
C. Increase of $22,600
D. Increase of $2,200

D. Increase of $2,200

Homme Corporation: The marketing manager would like to cut the selling price by $18 and increase the advertising budget by
$8,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 700 units. What should be the overall effect on the company's monthly net operating income of this
change?
A. Decrease of $32,600
B. Increase of $32,600
C. Increase of $112,400
D. Decrease of $3,400

D. Decrease of $3,400

Laro Since the new component would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 500 units. What should be the overall effect on the
company's monthly net operating income of this change?
A. Increase of $1,000
B. Decrease of $1,000
C. Increase of $34,000
D. Decrease of $34,000

B. Decrease of $1,000

Laro: The marketing manager believes that a $7,000 increase in the monthly advertising budget would result
in a 110 unit increase in monthly sales. What should be the overall effect on the company's monthly net
operating income of this change?
A. Increase of $1,250
B. Decrease of $7,000
C. Decrease of $1,250
D. Increase of $8,250

A. Increase of $1,250

Laro: The marketing manager would like to cut the selling price by $13 and increase the advertising budget by
$17,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 1,200 units. What should be the overall effect on the company's monthly net operating income of this
change?
A. Decrease of $57,400
B. Decrease of $7,600
C. Increase of $57,400
D. Increase of $147,400

B. Decrease of $7,600

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The
marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a
decrease in their salaries of $40,000 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?
A. Increase of $376,600
B. Increase of $1,600
C. Decrease of $78,400
D. Increase of $39,100

B. Increase of $1,600

Budget data for the Bidwell Company are as follows:
-Bidwell's break-even sales in units is:
-The number of units Bidwell would have to sell to earn a net operating income of $150,000 is:
-If fixed expenses increased $31,500, the break-even sales in units would be:

Unit Sales:D. 70,000 units
NOI:B. 120,000 units
Fixed: B. 80,500 units

Frymire Corporation produces and sells a single product. Data concerning that product appear below
-The unit sales to attain that the target profit of $36,000 is closest to:
-Assume the company's monthly target profit is $46,000. The dollar sales to attain that target profit is
closest to:

Unit Sales:C. 6,564 units
Dollar Sales:C. $1,590,257

Data concerning Celenza Corporation's single product appear below:
-Assume the company's monthly target profit is $25,000. The unit sales to attain that target profit are
closest to:
-Assume the company's monthly target profit is $18,000. The dollar sales to attain that target profit are
closest to:

Unit Sales: B. 4,247 units
Target Profit: A. $967,324

Scheidel Enterprises, Inc.
-Assume the company's monthly target profit is $21,000. The unit sales to attain that target profit are
closest to:
-Assume the company's monthly target profit is $31,000. The dollar sales to attain that target profit are
closest to:

Units: B. 6,494 units
Sales: A. $1,251,386

Smotherman Corporation
-The break-even in monthly unit sales is closest to:
-The break-even in monthly dollar sales is closest to:

Units:D. 1,730 units
Dollars: D. $242,200

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

Unit: B. 4,390 units
Sales: C. $1,009,700

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 unit sales is closest to:
-The break-even in monthly dollar sales is closest to:

Unit: B. 4,640 units
Sales:D. $835,200

Hunter Corporation sells a product for $180 per unit. The product's current sales are 34,900 units and its
break-even sales are 25,128 units.
-What is the margin of safety in dollars?
-The margin of safety as a percentage of sales is closest to:

Margin of Safety: C. $1,758,960
%: B. 28%

Delreal Corporation has provided the following data concerning its only product:
-What is the margin of safety in dollars?
-The margin of safety as a percentage of sales is closest to:

Dollars: B. $815,760
% of sales: A. 18%

Toye Corporation has provided its contribution format income statement for March.
-The degree of operating leverage is closest to:
-If the company's sales increase by 12%, its net operating income should increase by about

Operating Leverage: D. 6.34
NOI: D. 76%

The February contribution format income statement of Caines Corporation appears below
-The degree of operating leverage is closest to:
-If the company's sales increase by 18%, its net operating income should increase by about:

Operating Leverage:A. 3.49
Increase in sales: D. 63%

Henning Corporation produces and sells two models of hair dryers, Standard and
Deluxe. The company has provided the following data relating to these two products:
-The break-even in sales dollars for the expected sales mix is (rounded):
-If the expected monthly sales in units were divided equally between the two models (900 Standard and
900 Deluxe), the break-even level of sales would be:

Sales dollars: B. $30,000
Units: B. higher than with the expected sales mix

Kuhner Corporation produces and sells two products. Data concerning those products for the most recent
-The break-even point for the entire company is closest to:
-If the sales mix were to shift toward Product B64P with total dollar sales remaining constant, the overall
break-even point for the entire company

Break even point: A. $48,676
Overall: B. would decrease.

Schlender Corporation
-The break-even point for the entire company is closest to:
-If the sales mix were to shift toward Product L40O with total dollar sales remaining constant, the overall
break-even point for the entire company:

Break even:C. $69,762
Overall:B. would increase.

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set