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

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Question 31

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At the break-even point, the total contribution margin and fixed expenses are equal.

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Question 32

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If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the degree of operating leverage is equal to:

A) Q/(P-V) .
B) F/(P-V) .
C) F/[(P-V) /P].
D) [(P-V) Q]/[(P-V) Q - F].

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Question 33

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

Alcina Corporation produces and sells a single product whose contribution margin ratio is 80%. The company's monthly fixed expense is $576,000 and the company's monthly target profit is $43,200. Required: Determine the dollar sales to attain the company's target profit. Show your work!

Arthur Corporation has a margin of safety percentage of 25% based on its actual sales. The break-even point is $300,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:

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

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

Larita Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $243,000 per month. The company is currently selling 2,000 units per month. Required: The marketing manager believes that a $28,000 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!

A tile manufacturer has supplied the following data: If the company increases its unit sales volume by 5% without increasing its fixed expenses, then total net operating income should be closest to:

Data concerning Sumter Corporation's single product appear below: Fixed expenses are $1,024,000 per month. The company is currently selling 8,000 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $6. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 300 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!

Data concerning Marchman Corporation's single product appear below: The company is currently selling 4,000 units per month. Fixed expenses are $166,000 per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Marchman 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 $8 per unit. In exchange, the sales staff would accept a decrease in their salaries of $27,000 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?

Brees Inc., a company that produces and sells a single product, has provided its contribution format income statement for April. If the company sells 5,800 units, its total contribution margin should be closest to:

Koelsch Corporation's only product sells for $170 per unit. Its current sales are 43,600 units and its break-even sales are 39,240 units. Required: Compute the margin of safety in both dollars and as a percentage of sales.

Data concerning Bunck Corporation's single product appear below: Fixed expenses are $202,000 per month. The company is currently selling 2,000 units per month. Management is considering using a new component that would increase the unit variable cost by $18. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Torbert, Inc., produces and sells a single product. The product sells for $190.00 per unit and its variable expense is $72.20 per unit. The company's monthly fixed expense is $353,400. Required: Determine the monthly break-even in unit sales. Show your work!

Data concerning Phung Corporation's single product appear below: Fixed expenses are $991,000 per month. The company is currently selling 8,000 units per month. Required: The marketing manager believes that a $23,000 increase in the monthly advertising budget would result in a 190 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!

Chibu Corporation is a single product firm with the following cost formula for all of its costs for next year, where X is the number of units sold and Y is total cost: Y = $225,000 + $30X Chibu sells its product for $120 per unit. What would Chibu's total sales dollars have to be next year in order to generate $270,000 of net operating income?

Data concerning Wythe Corporation's single product appear below: Fixed expenses are $106,000 per month. The company is currently selling 2,000 units per month. The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $5,000 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?

Spartan Systems reported total sales of $300,000, at a price of $20 and per unit variable expenses of $12, for the sales of their single product. What is the amount of contribution margin if sales volume increases by 30%?

At a break-even point of 800 units sold, White Corporation's variable expenses are $8,000 and its fixed expenses are $4,000. What will the Corporation's net operating income be at a volume of 801 units?