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Exam 10: Cost-Volume-Profit Relationships

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Question 51

True/False

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All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase.

A) True
B) False

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Question 52

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This question is to be considered independently of all other questions relating to Marchman 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 $2. Since the new component would increase the features of 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?

A) decrease of $9,200
B) increase of $1,200
C) decrease of $1,200
D) increase of $9,200

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

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Question 53

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Bianchini Corporation's contribution margin ratio is 58% and its fixed monthly expenses are $94,000. Assume that the company's sales for May are expected to be $178,000. Required: Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change. Show your work!

For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.

Hartung Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $147,000 per month. The company is currently selling 2,000 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 $13 per unit. In exchange, the sales staff would accept a decrease in their salaries of $22,000 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 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Buccheri Corporation produces and sells a single product. Data concerning that product appear below: Required: Determine the monthly break-even in unit sales. Show your work!

If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative to its previous position will:

Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. If the company sells 5,400 units, its net operating income should be closest to:

If the company sells 5,900 units, its total contribution margin should be closest to:

Koelsch Corporation's only product sells for $170 per unit. Its current sales are 43,600 units and its break-even sales are 39,240 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

All other things the same, a reduction in the variable expense per unit will decrease the break-even point.

One way to compute the total contribution margin is to deduct total fixed expenses from net operating income.

Hargenrader Inc. produces and sells two products. During the most recent month, Product P02S's sales were $24,000 and its variable expenses were $7,920. Product O50U's sales were $41,000 and its variable expenses were $14,180. The company's fixed expenses were $40,350. Required: a. Determine the overall break-even point for the company in total sales dollars. Show your work! b. If the sales mix shifts toward Product P02S with no change in total sales, what will happen to the break-even point for the company? Explain.

Data concerning Bunck Corporation's single product appear below: Fixed expenses are $202,000 per month. The company is currently selling 2,000 units per month. Management is considering using a new component that would increase the unit variable cost by $18. 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?

Solen Corporation's break-even-point in sales is $900,000, and its variable expenses are 75% of sales. If the company lost $32,000 last year, sales must have amounted to:

The company's contribution margin ratio is closest to:

Assume the company's target profit is $14,000. The unit sales to attain that target profit is closest to:

Macmullen 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 $30,970. If the sales mix were to shift toward Product D08Q with total dollar sales remaining constant, the overall break-even point for the entire company:

Seiersen Corporation's contribution format income statement for February appears below: The degree of operating leverage is closest to:

Marano Corporation produces and sells a single product. In October, the company sold 6,200 units. Its total sales were $223,200, its total variable expenses were $105,400, and its total fixed expenses were $100,400. Required: a. Construct the company's contribution format income statement for October. b. Redo the company's contribution format income statement assuming that the company sells 6,400 units.