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Exam 5: Cost-Volume-Profit Relationships

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Question 61

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A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is:

A) $32,000
B) $96,000
C) $128,000
D) $192,000

E) None of the above
F) B) and C)

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Question 62

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Newham Corporation produces and sells two products. In the most recent month, Product R10L had sales of $28,000 and variable expenses of $6,440. Product X96N had sales of $22,000 and variable expenses of $7,560. The fixed expenses of the entire company were $32,710. The break-even point for the entire company is closest to:

A) $32,710
B) $45,431
C) $46,710
D) $17,290

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

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Question 63

Multiple Choice

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Roddam Corporation produces and sells two products. Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $41,970. If the sales mix were to shift toward Product K09E with total dollar sales remaining constant, the overall break-even point for the entire company:

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:

A manufacturer of cedar shingles has supplied the following data: The company's contribution margin ratio is closest to:

The July contribution format income statement of Doxtater Corporation appears below: If the company's sales volume increases by 19%, its net operating income should increase by about:

Speckman Enterprises, Incorporated, produces and sells a single product whose selling price is $200.00 per unit and whose variable expense is $68.00 per unit. The company's monthly fixed expense is $514,800. Assume the company's target profit is $11,000. The unit sales to attain that target profit is closest to:

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:

Wuensch Incorporated, an escrow agent, has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed. Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction.Using the high-low method, the estimate of the fixed component of office expense per month is closest to: (Round your intermediate calculations to 2 decimal places.)

Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company. Butler Sales Company's traditional format income statements for the last two years are given below: Selling and administrative expense is a mixture of fixed costs and variable costs that vary with respect to the number of units sold. Required: a. Estimate the company's variable selling and administration expense per unit, and its total fixed selling and administrative expense per year. b. Compute the company's contribution margin for this year.

Highjinks, Incorporated, has provided the following budgeted data: How many units would the company have to sell in order to have a net operating income equal to 5% of total sales dollars?

Electrical costs at one of Finfrock Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round your intermediate calculations to 2 decimal places.)

The contribution margin ratio of Kuck Corporation's only product is 67%. The company's monthly fixed expense is $454,500 and the company's monthly target profit is $40,500.Required: Determine the dollar sales to attain the company's target profit.

On a Cost-Volume-Profit graph for a profitable company, the total expense line will be steeper than the total revenue line.

Thomason Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If the variable cost per unit increases by $1, spending on advertising increases by $2,000, and unit sales increase by 50 units, the net operating income would be closest to:

Sebree Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The degree of operating leverage is closest to:

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?

The break-even point can be determined by simply adding together all of the expenses from the income statement.

Sarratt Corporation's contribution margin ratio is 62% and its fixed monthly expenses are $91,000. Assume that the company's sales for May are expected to be $193,000.Required:Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change.

Furlan Printing Corp., a book printer, has provided the following data: Management believes that the press setup cost is a mixed cost that depends on the number of titles printed. (A specific book that is to be printed is called a "title". Typically, thousands of copies will be printed of each title. Specific steps must be taken to setup the presses for printing each title-for example, changing the printing plates. The costs of these steps are the press setup costs.)Required:Estimate the variable cost per title printed and the fixed cost per month using the least-squares regression method. (Round the "Variable cost" to 2 decimal places and the "Fixed cost" to the nearest dollar amount.)