1. Jensen Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio?
|
|
Contribution margin per unit
|
Contribution margin ratio
|
|
Option A
|
No change
|
No change
|
|
Option B
|
Increase
|
Increase
|
|
Option C
|
Increase
|
No change
|
|
Option D
|
Increase
|
Decrease
|
Option A
Option D
Option C
Option B
2. Break-even analysis assumes that:
· The average variable expense per unit is constant.
· Total costs are constant.
· The average fixed expense per unit is constant.
· Variable expenses are nonlinear.
3. 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 break-even point in units is:
· F ÷ (P-V)
· Q ÷ (P-V)
· V ÷ (P-V)
· F ÷ [Q(P-V)]
4. All other things the same, which of the following would be true of the contribution margin and variable expenses of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs? CHOOSE ONE OPTION:
|
|
Contribution Margin
|
Variable Costs
|
|
Option A
|
Higher
|
Higher
|
|
Option B
|
Lower
|
Higher
|
|
Option C
|
Higher
|
Lower
|
|
Option D
|
Lower
|
Lower
|
Franklin Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:
· $18,000
· $22,500
· $22,000
· $27,500
6. A company has provided the following data:
|
Sales
|
3,000 units
|
|
Sales price
|
$70 per unit
|
|
Variable cost
|
$50 per unit
|
|
Fixed cost
|
$25,000
|
$25,000
If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, net operating income will:
· increase by $20,625.
· decrease by $31,875.
· decrease by $3,125.
· decrease by $15,000.
Sprockets Corporation has provided the following cost data for last year when 100,000 units were produced and sold:
|
Raw materials
|
$200,000
|
|
Direct labor
|
$100,000
|
|
Manufacturing overhead
|
$200,000
|
|
Selling and administrative expense
|
$150,000
|
All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit, the net operating income from producing and selling 110,000 units would be:
· $450,000
· $560,000
· $405,000
· $385,000
8. Valentine Company had the following income statement for the most recent year:
|
Sales (17,000 units)
|
$357,000
|
|
Variable expenses
|
$255,000
|
|
Contribution margin
|
$102,000
|
|
Fixed expenses
|
$68,000
|
|
Net operating income
|
$34,000
|
Given this data, the unit contribution margin was:
· $6 per unit
· $2 per unit
· $4 per unit
· $15 per unit
9. Butaffuco Corporation has provided its contribution format income statement for January. The company produces and sells a single product.
|
Sales (2,900 units)
|
$269,700
|
|
Variable expenses
|
$107,300
|
|
Contribution margin
|
$162,400
|
|
Fixed expenses
|
$137,100
|
|
Net operating income
|
$25,300
|
If the company sells 3,100 units, its total contribution margin should be closest to:
· $181,000
· $173,600
· $162,400
· $24,047
10. Greasy Inc. produces and sells a single product. The company has provided its contribution format income statement for May.
|
Sales (4,500 units)
|
$427,500
|
|
Variable expenses
|
$265,500
|
|
Contribution margin
|
$162,000
|
|
Fixed expenses
|
$135,300
|
|
Net operating income
|
$26,700
|
If the company sells 4,300 units, its net operating income should be closest to:
· $26,700
· $19,500
· $25,513
· $7,700
11. The Simpson Company manufactures and sells a single product which sells for $50 per unit and has a contribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desires a monthly target net operating income equal to 20% of sales dollars, sales in units will have to be (rounded):
· 1,000 units
· 1,666 units
· 5,000 units
· 2,500 units
12. Rexin Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed expenses total $9,600, the break-even point will be:
· $9,600
· $14,400
· $16,000
· $24,000
13. Emily, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000?:
· $24,000 increase
· $16,000 increase
· $11,000 decrease
· $5,000 increase
14. Union Corporation produces and sells a single product. Data concerning that product appear below:
|
|
Per Unit
|
Percent of Sales
|
|
Selling price
|
$180
|
100%
|
|
Variable expenses
|
$90
|
50%
|
|
Contribution margin
|
$90
|
50%
|
The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per month. The marketing manager believes that an $18,000 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?:
· decrease of $18,000
· increase of $15,300
· increase of $2,700
· decrease of $2,700
15. Hempsen Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000 and variable expenses are expected to be $8 per unit. How many units must the company sell to generate net operating income of $80,000?:
· 60,000 units
· 50,000 units
· 100,000 units
· 120,000 units.