Reference no: EM131116982
1. Jensen 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?
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Contribution margin per unit
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Contribution margin ratio
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Option A
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No change
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No change
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Option B
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Increase
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Increase
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Option C
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Increase
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No change
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Option D
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Increase
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Decrease
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Option A
Option D
Option C
Option B
2. Break-even analysis assumes that:
· The average variable expense per unit is constant.
· Total costs are constant.
· The average fixed expense per unit is constant.
· Variable expenses are nonlinear.
3. 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:
· F ÷ (P-V)
· Q ÷ (P-V)
· V ÷ (P-V)
· F ÷ [Q(P-V)]
4. 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? CHOOSE ONE OPTION:
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Contribution Margin
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Variable Costs
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Option A
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Higher
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Higher
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Option B
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Lower
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Higher
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Option C
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Higher
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Lower
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Option D
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Lower
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Lower
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Franklin Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:
· $18,000
· $22,500
· $22,000
· $27,500
6. A company has provided the following data:
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Sales
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3,000 units
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Sales price
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$70 per unit
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Variable cost
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$50 per unit
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Fixed cost
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$25,000
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$25,000
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:
· increase by $20,625.
· decrease by $31,875.
· decrease by $3,125.
· decrease by $15,000.
Sprockets Corporation has provided the following cost data for last year when 100,000 units were produced and sold:
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Raw materials
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$200,000
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Direct labor
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$100,000
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Manufacturing overhead
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$200,000
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Selling and administrative expense
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$150,000
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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:
· $450,000
· $560,000
· $405,000
· $385,000
8. Valentine Company had the following income statement for the most recent year:
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Sales (17,000 units)
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$357,000
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Variable expenses
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$255,000
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Contribution margin
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$102,000
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Fixed expenses
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$68,000
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Net operating income
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$34,000
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Given this data, the unit contribution margin was:
· $6 per unit
· $2 per unit
· $4 per unit
· $15 per unit
9. Butaffuco Corporation has provided its contribution format income statement for January. The company produces and sells a single product.
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Sales (2,900 units)
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$269,700
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Variable expenses
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$107,300
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Contribution margin
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$162,400
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Fixed expenses
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$137,100
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Net operating income
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$25,300
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If the company sells 3,100 units, its total contribution margin should be closest to:
· $181,000
· $173,600
· $162,400
· $24,047
10. Greasy Inc. produces and sells a single product. The company has provided its contribution format income statement for May.
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Sales (4,500 units)
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$427,500
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Variable expenses
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$265,500
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Contribution margin
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$162,000
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Fixed expenses
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$135,300
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Net operating income
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$26,700
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If the company sells 4,300 units, its net operating income should be closest to:
· $26,700
· $19,500
· $25,513
· $7,700
11. The Simpson 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):
· 1,000 units
· 1,666 units
· 5,000 units
· 2,500 units
12. Rexin 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:
· $9,600
· $14,400
· $16,000
· $24,000
13. Emily, 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?:
· $24,000 increase
· $16,000 increase
· $11,000 decrease
· $5,000 increase
14. Union Corporation produces and sells a single product. Data concerning that product appear below:
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Per Unit
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Percent of Sales
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Selling price
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$180
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100%
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Variable expenses
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$90
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50%
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Contribution margin
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$90
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50%
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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?:
· decrease of $18,000
· increase of $15,300
· increase of $2,700
· decrease of $2,700
15. Hempsen 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?:
· 60,000 units
· 50,000 units
· 100,000 units
· 120,000 units.