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Exam 2: Costvolumeprofit Relationships

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Question 111

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Sannella Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $991,000 per month. The company is currently selling 8,000 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 $74,000 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 200 units. What should be the overall effect on the company's monthly net operating income of this change?

A) increase of $1,246,600
B) increase of $14,600
C) decrease of $133,400
D) increase of $71,800

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Question 112

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Valdez Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The number of units that must be sold to achieve a target profit of $24,000 is closest to:

A) 30,000 units
B) 7,800 units
C) 13,800 units
D) 24,000 units

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Question 113

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The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin.

A cement manufacturer has supplied the following data: What is the company's unit contribution margin? (Round your intermediate calculations to 2 decimal places.)

Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $42,550. The break-even point for the entire company is closest to: (Round your intermediate calculations to 2 decimal places.)

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. If the company sells 5,300 units, its net operating income should be closest to:

Two companies with the same margin of safety in dollars will also have the same total contribution margin.

Logsdon Corporation produces and sells a single product whose contribution margin ratio is 63%. The company's monthly fixed expense is $720,720 and the company's monthly target profit is $28,000. The dollar sales to attain that target profit is closest to:

Which of the following is an assumption underlying standard CVP analysis?

Heathman Inc. produces and sells a single product. The selling price of the product is $230.00 per unit and its variable cost is $89.70 per unit. The fixed expense is $308,660 per month. The break-even in monthly unit sales is closest to: (Round your intermediate calculations to 2 decimal places.)

Evan's Electronics Boutique sells a digital camera. The following information was reported for the digital camera last month: Evan's margin of safety in dollars and percentage are closest to:

Sattler Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. What is the contribution margin per unit? b. What is the variable expense ratio? c. If sales decline to 7,900 units, what would be the estimated net operating income? d. If the variable cost per unit increases by $5, spending on advertising increases by $2,000, and unit sales increase by 3,400 units, what would be the estimated net operating income? e. What is the break-even point in dollar sales? f. Estimate how many units must be sold to achieve a target profit of $50,400. g. What is the margin of safety percentage? h. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 15% increase in sales?

Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product. If the company sells 9,100 units, its total contribution margin should be closest to:

Sunnripe Corporation manufactures and sells two types of beach towels, standard and deluxe. Sunnripe expects the following operating results next year: Sunnripe expects to have a total of $57,600 in fixed expenses next year. What is Sunnripe's overall break-even point next year in sales dollars?

Given the following data: The break-even point in dollars is: (Round your intermediate calculations to 2 decimal places.)

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

Malensek International, Inc., produces and sells a single product. The product sells for $240.00 per unit and its variable expense is $55.20 per unit. The company's monthly fixed expense is $249,480. Required: Determine the monthly break-even in total dollar sales. Show your work!

To estimate what the profit will be at various levels of activity, multiply the number of units to be sold above or below the break-even point by the unit contribution margin.

If the contribution margin is not sufficient to cover fixed expenses:

Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June. If the company sells 9,200 units, its net operating income should be closest to: