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Exam 2: Cost-Volume-Profit Relationships

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Question 81

Multiple Choice

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

A) $896,744
B) $466,900
C) $1,556,333
D) $667,000

E) None of the above
F) All of the above

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Question 82

Multiple Choice

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If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net operating income should be closest to:

A) $3,000
B) $101,371
C) $115,480
D) $103,000

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

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Question 83

Multiple Choice

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Data concerning Knipp Corporation's single product appear below: Fixed expenses are $587,000 per month. The company is currently selling 4,000 units per month. 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 $57,000 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?

The following information pertains to Clove Co.: Clove's margin of safety is:

This question is to be considered independently of all other questions relating to Homme Corporation. Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $18 and increase the advertising budget by $8,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 700 units. What should be the overall effect on the company's monthly net operating income of this change?

Assume the company's monthly target profit is $46,000. The dollar sales to attain that target profit is closest to:

Danneman Corporation's fixed monthly expenses are $13,000 and its contribution margin ratio is 56%. 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 $41,000?

The contribution margin is:

Bumpass Corporation's contribution margin ratio is 74% and its fixed monthly expenses are $43,000. Assume that the company's sales for July are expected to be $102,000. Required: Estimate the company's net operating income for July, assuming that the fixed monthly expenses do not change. Show your work!

Net operating income at sales of 12,000 units is:

Mitzel Corporation has provided its contribution format income statement for May. 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 an 18% increase in sales.

The company's degree of operating leverage is closest to:

Data concerning Lantieri Corporation's single product appear below: Fixed expenses are $162,000 per month. The company is currently selling 3,000 units per month. Required: The marketing manager believes that a $10,000 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? Show your work!

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the sum of the fixed expenses and the target profit by the contribution margin ratio.

Arzola Corporation produces and sells a single product. Data concerning that product appear below: Required: Assume the company's monthly target profit is $17,080. Determine the unit sales to attain that target profit. Show your work!

The contribution margin ratio is:

At the break-even point: Sales - Variable expenses = Fixed expenses.

Data concerning Goulbourne Corporation's single product appear below: Fixed expenses are $444,000 per month. The company is currently selling 7,000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $2. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 200 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Assume the company's monthly target profit is $18,000. The dollar sales to attain that target profit are closest to:

Darth Company sells three products. Sales and contribution margin ratios for the three products follow: Given these data, the contribution margin ratio for the company as a whole would be: