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Exam 5: Cost-Volume-Profit Relationships

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Question 51

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Sun Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. What is the margin of safety in dollars? b. What is the degree of operating leverage?

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a. CM ratio = Contribution margin ÷ Sale...

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Question 52

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Sorin Incorporated, a company that produces and sells a single product, has provided its contribution format income statement for January. If the company sells 4,100 units, its total contribution margin should be closest to: (Do not round intermediate calculations.)

A) $46,656
B) $53,136
C) $81,300
D) $10,655

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

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Question 53

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In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be lower in the company with a higher proportion of fixed expenses in its cost structure.

Shambo Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The margin of safety percentage is closest to:

Mcmurtry Corporation sells a product for $300 per unit. The product's current sales are 14,100 units and its break-even sales are 10,293 units. The margin of safety as a percentage of sales is closest to:

Moyas Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $300,000 and its net operating income was $24,000. If fixed expenses totaled $96,000 for the year, the break-even point in unit sales was:

A cement manufacturer has supplied the following data: What is the company's unit contribution margin? (Round your intermediate calculations to 2 decimal places.)

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year?

Variable expenses for Alpha Corporation are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year:

For a given level of sales, a low contribution margin ratio will produce more net operating income than a high contribution margin ratio.

Valdez Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The break-even point in unit sales is closest to:

Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $42,550.The break-even point for the entire company is closest to: (Round your intermediate calculations to 2 decimal places.)

A decrease in the number of units sold will decrease the break-even point.

Jerrel Corporation sells a product for $230 per unit. The product's current sales are 24,000 units and its break-even sales are 17,280 units. What is the margin of safety in dollars?

Alpha Corporation reported the following data for its most recent year: sales, $700,000; variable expenses, $490,000; and fixed expenses, $140,000. The company's degree of operating leverage is closest to:

Which of the following would not affect the break-even point?

One of Matthew Corporation's competitors has learned that Matthew has a total expense per unit of $1.50 at the 15,000 unit level of activity and total expense per unit of $1.45 at the 20,000 unit level of activity. Assume that the relevant range includes all of the activity levels mentioned in this problem.What would be the competitor's prediction of total expected costs at 18,000 units? (Round your intermediate calculations to 2 decimal places.)

Escareno Corporation has provided its contribution format income statement for June. The company produces and sells a single product. If the company sells 8,200 units, its total contribution margin should be closest to:

Deidoro Company has provided the following data for maintenance cost: Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable components of maintenance cost are closest to: (Round your intermediate calculations to 2 decimal places.)

Inspection costs at one of Ratulowski Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced.Using the high-low method, the estimate of the variable component of inspection cost per unit produced is closest to: