Assignment

Question 1

Your friend remarked, "A company will never drop a product from its product line that has a positive contribution margin. It will want to garner every bit of profit that it can." Is this true in all cases? What are the risks and benefits of evaluating product continuation or implementation using the contribution margin?

Question 2

Perform an Internet search using the term break-even analysis. Select and read a case study or article from the results of your search. (Make sure that you do not select an instructor's lecture notes or a class assignment from the results of your search.) Summarize the case study or article, and relate the ideas of the article to what you have learned this week in this course.

Citation enclosed and References

Question 1. A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is:

$32,000

$96,000

$128,000

$192,000

Question 2. 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:

$301,000

$311,600

$319,200

$66,674

Question 3. Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June.

If the company sells 9,200 units, its net operating income should be closest to:

$27,077

$49,900

$36,700

$25,900

Question 4. Holt Company's variable expenses are 70% of sales. At a $300,000 sales level, the degree of operating leverage is 10. If sales increase by $60,000, the degree of operating leverage will be:

12

10

6

4

Question 5. ABC Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. ABC expects to produce and sell 60,000 units at a price of $20 per unit. How much is the break-even point in units?

48,000

72,000

3,600

8,471

Question 6. Hartl Corporation is a single product firm with the following selling price and cost structure for next year:

How many units will Hartl have to sell next year in order to break-even?

121,500

202,500

303,750

546,750

Question 7. Wenstrom Corporation produces and sells a single product. Data concerning that product appear below:

The break-even in monthly dollar sales is closest to:

$342,550

$204,455

$109,616

$161,200

Question 8. Gayne Corporation's contribution margin ratio is 12% and its fixed monthly expenses are $84,000. If the company's sales for a month are $738,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

$565,440

$654,000

$88,560

$4,560

Question 9. Jilk Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are $36,000. 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 $103,000?
$23,740

$59,740

$67,000

$7,260

Question 10. Rambles Toyland makes a product that sells for $70 per unit and has $45 per unit in variable costs. Annual fixed costs are $24,000. How many units must be sold to earn a profit of $12,000?

960

1,440

480

171

Question 11. Wimpy Inc. produces and sells a single product. The selling price of the product is $150.00 per unit and its variable cost is $58.50 per unit. The fixed expense is $366,915 per month.

The break-even in monthly dollar sales is closest to:

$601,500

$366,915

$636,408

$940,808

Question 12. Logsdon Corporation produces and sells a single product whose contribution margin ratio is 63%. The company's monthly fixed expense is $720,720 and the company's monthly target profit is $28,000. The dollar sales to attain that target profit is closest to:

$471,694

$454,054

$1,188,444

$1,144,000

Question 13. Shun Corporation manufactures and sells a hand held calculator. The following information relates to Shun's operations for last year:

What is Shun's unit product cost under absorption costing for last year?

$4.10

$4.55

$5.85

$6.30

Question 14. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under absorption costing?

$67

$105

$111

$73

Question 15. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under variable costing?

$118

$94

$111

$87

Question 16. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

The total contribution margin for the month under the variable costing approach is:

$155,000

$260,400

$192,200

$83,400

Question 17. Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations:

There were no beginning or ending inventories. The unit product cost under absorption costing was:

$93

$97

$136

$194.