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Exam 6: Cost-Volume-Profit Relationships

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Question 21

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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:

A) $471,694
B) $454,054
C) $1,188,444
D) $1,144,000

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Question 22

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Data concerning Dorazio Corporation's single product appear below: Fixed expenses are $87,000 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 $28.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) increase of $5,600
B) increase of $33,600
C) decrease of $5,600
D) decrease of $33,600

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Question 23

Multiple Choice

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The break-even point in unit sales is closest to:

If the sales mix were to shift toward Product B32L with total sales remaining constant, the overall break-even point for the entire company:

Lydic Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. The degree of operating leverage is closest to:

The smaller the contribution margin ratio, the smaller the amount of sales required to cover a given amount of fixed expenses.

The margin of safety percentage is equal to the margin of safety in dollars divided by total contribution margin.

If fixed expenses increase by $10,000 per year, then the sales needed to break even will generally increase by more than $10,000.

The contribution margin per unit is closest to:

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

Last year Easton Corporation reported sales of $480,000, a contribution margin ratio of 25% and a net loss of $16,000.Based on this information, the break-even point was:

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

Schister Systems uses the following data in its Cost-Volume-Profit analyses: What is total contribution margin if sales volume increases by 20%?

This question is to be considered independently of all other questions relating to Houpe Corporation.Refer to the original data when answering this question. The marketing manager believes that a $14,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

Bethard Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $354,000 per month.The company is currently selling 5,000 units per month. Required: The marketing manager would like to cut the selling price by $8 and increase the advertising budget by $23,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 600 units.What should be the overall effect on the company's monthly net operating income of this change? Show your work!

Zaccaria 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 ratio? b.If sales increase to 5,040 units, what would be the estimated increase in net operating income? c.If the selling price increases by $4 per unit and the sales volume decreases by 400 units, what would be the estimated net operating income? d.What is the break-even point in unit sales? e.What is the margin of safety in dollars? f.What is the degree of operating leverage?

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

Which of the following would not affect the break-even point?

Mancine Corporation has provided the following contribution format income statement.All questions concern situations that are within the relevant range. Required: a.What is the break-even point in unit sales? b.Estimate how many units must be sold to achieve a target profit of $50,000.

If the company increases its unit sales volume by 4% without increasing its fixed expenses, then total net operating income should be closest to: