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A firm can reduce is operating leverage by substituting:


A) Direct materials for direct labor
B) Direct labor for robotic equipment
C) Equity for debt
D) Debt for equity

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The break-even point in sales dollars may be computed as:


A) Fixed costs divided by contribution margin per unit
B) The difference between total contribution margin and operating profit divided by the contribution margin ratio
C) Fixed costs divided by the difference in unit price and unit variable costs
D) Total contribution margin divided by the unit contribution margin per unit

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Which of the following statements regarding sales mix is true?


A) A shift in the sales mix can have a significant impact on the bottom line.
B) One of the limiting assumptions of the basic cost-volume-profit model is that the analysis is for a single product or the sales mix is constant.
C) Sales mix analysis is important in multiple-product or service organizations.
D) All of the above are true

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Operating leverage is computed as:


A) Contribution margin divided by before-tax profit
B) Contribution margin divided by net income
C) Fixed costs divided by before-tax profit
D) Operating income divided by total debt

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The following information is available for Redwood Corporation for a sales volume of 500 stereo speakers for the past month: The following information is available for Redwood Corporation for a sales volume of 500 stereo speakers for the past month: If sales increase by $51,750, net income will increase by what amount? A) $ 22,000 B) $30,000 C) $20,000 D) $33,350 If sales increase by $51,750, net income will increase by what amount?


A) $ 22,000
B) $30,000
C) $20,000
D) $33,350

Correct Answer

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Costs are classified according to behavior on which of the following?


A) Contribution Income Statement
B) Functional Income Statement
C) Cost of Goods Sold
D) Cost of Goods Manufactured

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A profit-volume graph:


A) Is most useful in situations where there are multiple cost drivers
B) Plots both revenue and total cost on the Y axis
C) Plots contribution margin on the Y axis and volume on the X axis
D) Plots total profit on the Y axis against total volume on the X axis

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Profitability analysis involves examining the relationships among all of the following except:


A) Revenues
B) Costs
C) Profits
D) Products

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Dunkin Bread Corporation had the following income statement for 2017: Dunkin Bread Corporation had the following income statement for 2017: Dunkin Bread's 2017 operating leverage is: A) 0.333 B) 2.500 C) 3.667 D) 5.000 Dunkin Bread's 2017 operating leverage is:


A) 0.333
B) 2.500
C) 3.667
D) 5.000

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Watson Company sells its product for $10 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $6 per unit. How many units must Watson sell to generate net operating income of $50,000?


A) 50,000 units
B) 60,000 units
C) 62,500 units
D) 120,000 units

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Sandy Corporation has provided the following cost data for last year when 50,000 units were produced and sold: Sandy Corporation has provided the following cost data for last year when 50,000 units were produced and sold: All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. If the selling price is $12 per unit, the net operating income from producing and selling 120,000 units would be: A) $460,000 B) $160,000 C) $85,000 D) $105,000 All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. If the selling price is $12 per unit, the net operating income from producing and selling 120,000 units would be:


A) $460,000
B) $160,000
C) $85,000
D) $105,000

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At its current level of sales, a company has a degree of operating leverage of 6. This means that a 10% increase in sales would result in a:


A) 6% Increase in before-tax profit
B) 10% Increase in before-tax profit
C) 60% Increase in before-tax profit
D) 60% Increase in contribution margin

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Ken Corporation is selling its product at unit price of $15, variable cost per unit is $7, fixed cost is $12,000 and it is subjected to 40 percent tax rate (includes federal and state income tax) . The desired after tax profit is $3,000, the number of units required to be sold is:


A) 2,125 units
B) 1,875 units
C) 2,152 units
D) 1,500 units

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Herman's income statement is as follows: Herman's income statement is as follows: If sales increase by 1,000 units, profits will: A) Increase by $10,200 B) Increase by $12,000 C) Increase by $2,400 D) Increase by $5,000 If sales increase by 1,000 units, profits will:


A) Increase by $10,200
B) Increase by $12,000
C) Increase by $2,400
D) Increase by $5,000

Correct Answer

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The FIFA sports store sells 1 World Cup soccer ball for every 4 regular style balls. The FIFA sports store sells 1 World Cup soccer ball for every 4 regular style balls. Total Fixed Cost for FIFA sports $12,000. Assuming a constant sales mix. The break-even unit sales volume is: A) 7,200 B) 3,840 C) 2,000 D) 9,023 Total Fixed Cost for FIFA sports $12,000. Assuming a constant sales mix. The break-even unit sales volume is:


A) 7,200
B) 3,840
C) 2,000
D) 9,023

Correct Answer

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Bloomington Corporation reported the following on their contribution format income statement: Bloomington Corporation reported the following on their contribution format income statement: If sales increase by 10%, net operating income will increase by what amount? A) $-0- B) $ 1,500 C) $ 7,500 D) $30,000 If sales increase by 10%, net operating income will increase by what amount?


A) $-0-
B) $ 1,500
C) $ 7,500
D) $30,000

Correct Answer

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In calculating the break-even point for a multi-product company, which of the following assumptions are commonly made? 1) Sales volume equals production volume 2) Variable expenses are constant per unit. 3) A given sales mix is maintained for all volume changes.


A) 1 and 2
B) 1 and 3
C) 2 and 3
D) 1, 2, and 3

Correct Answer

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Contribution margin measures:


A) The difference between total sales and total cost of goods sold
B) The difference between total sales and total costs
C) The difference between sales and variable manufacturing costs
D) The difference between total sales and total variable costs

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Brown sells tiling grout and reports the following data: Brown sells tiling grout and reports the following data: Calculate the company's operating leverage if sales decrease by 10%. Calculate the company's operating leverage if sales decrease by 10%.

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Contribution margin = $5,625,000 (sales)...

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Sales mix refers to:


A) The portion of unit variable costs that are consumed by each product
B) The absolute portion of total variable costs consumed by each product
C) The relative portion of unit or dollar sales that are derived from each product
D) None of the above

Correct Answer

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