### 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.

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

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.

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.

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.

C. \$405,000

C. \$6 per unit

D. \$13.30

D. \$173,600

B. \$34,500

B. \$28,800

D. \$19,500

B. \$440,000

B. \$350,000

D. 2,600 units

B. 5,000 units

A. 50,000 units

A. \$24,000

D. \$1,875

D. 3.91

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

B. \$11,420

D. \$22,840

A. \$9,960

A. 15,000 units

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

B. 120,000 units

B. 43,000 units

A. 37,500 units

B. \$570,000

B. 4,400 units

A. 4,408 units

D. 5,721units

C.\$761,159

B. \$944,667

B. 40%

B. \$225,000

B. \$1,000,000

B. 2,300 units

B. \$240,000

D. \$48,000

A. 1,200,000

C. 3,210 units

B. 1, 110 units

B.2,810 units

A. \$650,000

D. \$667,000

D. \$219,300

A. \$300,000

A. \$413,270

A. 20%

D. \$563,420

A. 19%

D. 3.50

C. \$4,000

D. 3.64

C. 4.69

A.44.4%

A. 69.6%

B. \$189,200

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.

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

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

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

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.

Example: