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Exam 6: Variable Costing and Segment Reporting: Tools for Management

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Question 21

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Boenisch Corporation produces and sells a single product with the following characteristics: The company is currently selling 8,000 units per month. Fixed expenses are $406,000 per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Boenisch Corporation. Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $30,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,800 units. What should be the overall effect on the company's monthly net operating income of this change?

A) decrease of $25,200
B) increase of $254,400
C) increase of $70,800
D) decrease of $70,800

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

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Question 22

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All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.

A) True
B) False

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Question 23

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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.

Gaskey Inc. expects its sales in February to be $173,000. The company's contribution margin ratio is 58% and its fixed monthly expenses are $94,000. Required: Estimate the company's net operating income for February, assuming that the fixed monthly expenses do not change. Show your work!

Moccio Enterprises, Inc., produces and sells a single product whose selling price is $120.00 per unit and whose variable expense is $37.20 per unit. The company's monthly fixed expense is $356,040. Assume the company's target profit is $14,000. The unit sales to attain that target profit is closest to:

The Breiden Corporation sells rodaks for $6.00 per unit. Fixed expenses total $37,500 per month and variable expenses are $2.00 per unit. The number of units that must be sold each month to realize a profit of 15% of sales is closest to:

Darwin Inc. sells a particular textbook for $20. Variable expenses are $14 per book. At the current volume of 50,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

Brower Inc. has provided the following data concerning its only product: Required: Compute the margin of safety in both dollars and as a percentage of sales.

Boenisch Corporation produces and sells a single product with the following characteristics: The company is currently selling 8,000 units per month. Fixed expenses are $406,000 per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Boenisch 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 $16 per unit. In exchange, the sales staff would accept a decrease in their salaries of $102,000 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 700 units. What should be the overall effect on the company's monthly net operating income of this change?

The records of the Dodge Corporation show the following results for the most recent year: Given these data, the unit contribution margin was:

Smee Inc. produces and sells a single product. The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit. The fixed expense is $281,580 per month. The break-even in monthly unit sales is closest to:

Dybala Corporation produces and sells a single product. Data concerning that product appear below: The company is currently selling 5,000 units per month. Fixed expenses are $173,000 per month. The marketing manager believes that a $6,000 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?

Xiong Corporation makes a product that sells for $130 per unit. The product's current sales are 14,000 units and its break-even sales are 10,220 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

Bohlen Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $716,000 per month. The company is currently selling 6,000 units per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Bohlen Corporation. Refer to the original data when answering this question. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales.

Mcallister Corporation has provided the following data concerning its only product: The margin of safety as a percentage of sales is closest to:

Lopp Corporation produces and sells a single product. Data concerning that product appear below: Required: Assume the company's monthly target profit is $38,280. Determine the unit sales to attain that target profit. Show your work!

The break-even in units sold will decrease if there is an increase in:

A manufacturer of premium wire strippers has supplied the following data: The company's unit contribution margin is closest to:

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