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Exam 4: Cost-Volume-Profit Relationships

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Question 51

Multiple Choice

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Murdoch Corporation has provided the following data concerning its only product: What is the margin of safety in dollars?

A) $2,158,320
B) $5,995,333
C) $6,834,680
D) $8,993,000

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Question 52

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The margin of safety is equal to:

A) Sales - Net operating income.
B) Sales - (Variable expenses/Contribution margin) .
C) Sales - (Fixed expenses/Contribution margin ratio) .
D) Sales - (Variable expenses + Fixed expenses) .

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Question 53

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Faust Corporation has provided its contribution format income statement for August. -The degree of operating leverage is closest to:

Similien Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $300,000 per month.The company is currently selling 5,000 units per month.The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $17,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 1,400 units.What should be the overall effect on the company's monthly net operating income of this change?

Data concerning Uthe Corporation's single product appear below: Fixed expenses are $522,000 per month.The company is currently selling 6,000 units per month. Required: The marketing manager would like to cut the selling price by $19 and increase the advertising budget by $30,900 per month.The marketing manager predicts that these two changes would increase monthly sales by 1,600 units.What should be the overall effect on the company's monthly net operating income of this change? Show your work!

On a CVP graph for a profitable company,the line representing total expenses is steeper than the line representing total revenue.

Wertman Corporation produces and sells a single product with the following characteristics: The company is currently selling 3,000 units per month.Fixed expenses are $215,000 per month.Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Wertman Corporation.Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $5.Since the new component would increase the features of the company's product,the marketing manager predicts that monthly sales would increase by 200 units.What should be the overall effect on the company's monthly net operating income of this change?

The ratio of fixed expenses to the unit contribution margin is the:

Mardist Corporation has sales of $100,000,variable expenses of $75,000,fixed expenses of $30,000,and a net loss of $5,000.How much would Mardist have to sell to achieve a profit of 10% of sales?

Junsin Corporation's budget for next year appears below.The budget assumes the company will sell 30,000 units. -The company's margin of safety as a percentage of sales (rounded to the nearest whole percent) is:

Wertman Corporation produces and sells a single product with the following characteristics: The company is currently selling 3,000 units per month.Fixed expenses are $215,000 per month.Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Wertman Corporation.Refer to the original data when answering this question. The marketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 110 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

At the break-even point,variable expenses and fixed expenses are equal.

North Company sells a single product.The product has a selling price of $30 per unit and variable expenses of 70% of sales.If the company's fixed expenses total $60,000 per year,then it will have a break-even of:

Data concerning Grodi Corporation's single product appear below: Fixed expenses are $324,000 per month.The company is currently selling 5,000 units per month.Management is considering using a new component that would increase the unit variable cost by $9.Since the new component would increase the features of the company's product,the marketing manager predicts that monthly sales would increase by 500 units.What should be the overall effect on the company's monthly net operating income of this change?

Riven Corporation has a single product whose selling price is $10.At an expected sales level of $1,000,000,the company's variable expenses are $600,000 and its fixed expenses are $300,000.The marketing manager has recommended that the selling price be increased by 20%,with an expected decrease of only 10% in unit sales.What would be the company's net operating income if the marketing manager's recommendation is adopted?

Faust Corporation has provided its contribution format income statement for August. -If the company's sales increase by 10%,its net operating income should increase by about:

The following is last month's contribution format income statement: What is the company's degree of operating leverage?

Hooper Corporation produces and sells two models of vacuum cleaners,Standard and Deluxe.The company records show the following monthly data relating to these two products: The company's total monthly fixed cost is $15,000. -If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe) ,the break-even level of sales would be:

The following is Addison Corporation's contribution format income statement for last month: The company has no beginning or ending inventories.A total of 20,000 units were produced and sold last month. -What is the company's margin of safety in dollars?

Witting Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly unit sales is closest to: