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Exam 6: Cost-Volume-Profit Relationship

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Question 51

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The following is last month's contribution format income statement: What is the company's break-even in unit sales?

A) 0 units
B) 12,000 units
C) 6,000 units
D) 8,000 units

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Question 52

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Data concerning Emmanuel Corporation's single product appear below: Fixed expenses are $650,000 per month. The company is currently selling 8,000 units per month. Required: The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $12 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $79,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

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Question 53

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Hurst Co. manufacturers and sells a single product. Price and cost data regarding this product are as follows: -How many units need to be sold to earn an annual net operating income equal to 10% of sales?

Scobie Corporation's fixed monthly expenses are $16,000 and its contribution margin ratio is 57%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $69,000?

Jatry Corporation's budgeted sales are $300,000, its budgeted variable expenses are $210,000, and its budgeted fixed expenses are $60,000. The company's break-even in dollar sales is:

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

Data concerning Sotero Corporation's single product appear below: The company is currently selling 5,000 units per month. Fixed expenses are $319,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Sotero 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 $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $37,000 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 100 units. What should be the overall effect on the company's monthly net operating income of this change?

Scott Company's variable expenses are 72% of sales. The company's break-even point in dollar sales is $2,450,000. If sales are $60,000 below the break-even point, the company would report a:

The ratio of fixed expenses to the unit contribution margin is the:

Janet Company produces a game that sells for $17 per game. Variable expenses are $9 per game and fixed expenses total $172,000 annually. -The break-even point is closest to:

Data concerning Grodi Corporation's single product appear below: Fixed expenses are $324,000 per month. The company is currently selling 5,000 units per month. Management is considering using a new component that would increase the unit variable cost by $9. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change?

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

Doubleday Corporation produces and sells a single product. The company has provided its contribution format income statement for August. -If the company sells 3,000 units, its total contribution margin should be closest to:

Data concerning Sotero Corporation's single product appear below: The company is currently selling 5,000 units per month. Fixed expenses are $319,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Sotero Corporation. Refer to the original data when answering this question. The marketing manager believes that a $12,000 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?

Data concerning Shanor Enterprises Corporation's single product appear below: The unit sales to attain the company's monthly target profit of $13,000 is closest to:

Data concerning Plaxco Corporation's single product appear below: -Assume the company's monthly target profit is $12,000. The dollar sales to attain that target profit is closest to:

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

Erdmann Corporation has provided its contribution format income statement for July. The company produces and sells a single product. -If the company sells 7,500 units, its total contribution margin should be closest to:

The April contribution format income statement of Iannacone Corporation appears below: -The degree of operating leverage is closest to:

Langin Corporation has provided its contribution format income statement for June. Required: a. Compute the degree of operating leverage to two decimal places. b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from a 14% increase in sales.