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Exam 2: Cost-Volume-Profit Relationships

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Question 1

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Malley Corporation has provided the following data concerning its only product: What is the margin of safety in dollars?

A) $1, 390, 000
B) $562, 950
C) $2, 085, 000
D) $1, 522, 050

E) A) and D)
F) None of the above

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Question 2

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

A) $16
B) $4
C) $2
D) $6

E) A) and B)
F) All of the above

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Question 3

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The following is Arkadia Corporation's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 20, 000 units during the month. Required: a.What is the company's contribution margin ratio? b.What is the company's break-even in units? c.If sales increase by 100 units, by how much should net operating income increase? d.How many units would the company have to sell to attain a target profit of $125, 000? e.What is the company's margin of safety in dollars? f.What is the company's degree of operating leverage?

Fost Corporation's contribution margin ratio is 20%.If the degree of operating leverage is 15 at the $225, 000 sales level, net operating income at the $225, 000 sales level must equal:

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

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:

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:

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 believes that a $10, 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?

Cleckley Corporation's operating leverage is 5.9.If the company's sales increase by 19%, its net operating income should increase by about:

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.

Stoppkotte Corporation has provided its contribution format income statement for April. If the company's sales increase by 10%, its net operating income should increase by about:

Grisham Corporation produces and sells a single product.The company has provided its contribution format income statement for February. If the company sells 5, 900 units, its total contribution margin should be closest to:

Carlton Corporation sells a single product at a selling price of $40 per unit.Variable expenses are $22 per unit and fixed expenses are $82, 800.Carlton's break-even point is:

Grable Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $628, 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 $18 and increase the advertising budget by $45, 000 per month.The marketing manager predicts that these two changes would increase monthly sales by 800 units.What should be the overall effect on the company's monthly net operating income of this change? Show your work!

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

Blackner Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly dollar sales is closest to:

One assumption in CVP analysis is that the number of units produced and sold does not change.

Maddaloni International, Inc. , produces and sells a single product.The product sells for $160.00 per unit and its variable expense is $46.40 per unit.The company's monthly fixed expense is $219, 248. Required: Determine the monthly break-even in total dollar sales.Show your work!

Lasseter Corporation has provided its contribution format income statement for August.The company produces and sells a single product. If the company sells 3, 800 units, its total contribution margin should be closest to:

All other things the same, an increase in total fixed expenses will increase the break-even point.