1. Jazz Products has the following information available for the month of March:

Sales (4,000 units)             $40,000

Variable costs                     18,000

Fixed costs                          5,000

Net income                         $17,000

The company's manager is considering several options to increase net income. By what amount do sales dollars need to increase in order for net income to increase by $8,000 to $25,000?

a. $14,545

b. $25,000

c. $3,000

d. $18,820

THE FOLLOWING INFORMATION RELATES TO FINANCIAL PROJECTIONS OF JARVIS COMPANY:

Projected sales                                                 60,000 units

Projected variable costs $2.00 per unit

Projected fixed costs $50,000 per year

Projected unit sales price $7.00

2. If Jarvis Company achieves its projections, what will be its degree of operating leverage?

a. 6.00

b. 1.20

c. 1.68

d. 2.40

3. Assuming a company has net income, with the sale of each additional unit, net income will increase by the __________ .

a. contribution margin ratio

b. contribution margin per unit

c. sales price per unit

d. fixed cost per unit

4. Kramer Company expects the following results this year:

Sales                                          $300,000

Variable costs                            $220,000

Fixed costs                                 $50,000

Expected production and sales  2,000 units         

The sales manager believes sales could be increased by 200 units if advertising expenditures were increased by $6,000. If advertising expenditures are increased and sales increase by 200 units, the effect on operating income will be a(n)

a. increase of $24,000

b. decrease of $6,000

c. increase of $2,000

d. decrease of $3,000

5. The operation of Cunningham Corporation are divided into the Davis Division and the Rockford Division. Projections for the next year are as follows:

                                                                               Davis                                                Rockford

                                                                                Division               Division                                             Total

Sales                                                                        $500,000                                        $360,000              $860,000

Less: Variable costs                                                   180,000            200,000                 380,000

Contribution margin                                                  $320,000           $160,000               $480,000

Less: Direct fixed costs                                                150,000            125,000                275,000

Segment margin                                                          $170,000           $35,000                $205,000

Less: Allocated common costs                                      70,000               55,000                 125,000

Operating income (loss)                                              $100,000          $(20,000)               $80,000

Operating income for Cunningham Corporation, as a whole, if the Rockford Division were dropped would be

a. $45,000

b. $80,000

c. $100,000

d. $120,000

6. Galaxy Industries manufactures 15,000 components per year. The manufacturing cost of the components was determined to be as follows:

Direct materials                                      $150,000

Direct labor                                            240,000

Variable manufacturing overhead         90,000

Fixed manufacturing overhead              120,000

Total                                                       $600,000

Assume Galaxy Industries could avoid $40,000 of fixed manufacturing overhead if it purchased the component from an outside supplier. An outside supplier has offered to sell the component for $34. If Galaxy purchases the component from the supplier instead of manufacturing it, the effect on income would be a

a. $60,000 increase

b. $10,000 increase

c. $100,000 decrease

d. $140,000 increase