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Chapter 6 Questions

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67 views

Chapter 6 Questions

Uploaded by

hannyhosny
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

Contribution margin can be defined as:


A) the amount of sales revenue necessary to cover variable expenses.
B) sales revenue minus fixed expenses.
C) the amount of sales revenue necessary to cover fixed and variable
expenses.
D) sales revenue minus variable expenses.

2. If a company is operating at the break-even point:


A) its contribution margin will be equal to its variable expenses.
B) its margin of safety will be equal to zero.
C) its fixed expenses will be equal to its variable expenses.
D) its selling price will be equal to its variable expense per unit.

3. At the break-even point:


A) sales would be equal to contribution margin.
B) contribution margin would be equal to fixed expenses.
C) contribution margin would be equal to net operating income.
D) sales would be equal to fixed expenses.

4. The break-even point would be increased by:


A) a decrease in total fixed expenses.
B) a decrease in the ratio of variable expenses to sales.
C) an increase in the contribution margin ratio.
D) none of these.

5. Escareno Corporation has provided its contribution format income statement


for June. The company produces and sells a single product.

Sales (8,400 units) .................................... $764,400


Variable expenses ..................................... 445,200
Contribution margin ................................. 319,200
Fixed expenses ......................................... 250,900
Net operating income ............................... $ 68,300

If the company sells 8,200 units, its total contribution margin should be closest
to:
A) $301,000
B) $311,600
C) $319,200
D) $66,674
6. Rovinsky Corporation, a company that produces and sells a single product, has
provided its contribution format income statement for November.

Sales (5,700 units) ...................... $319,200


Variable expenses ....................... 188,100
Contribution margin ................... 131,100
Fixed expenses ........................... 106,500
Net operating income ................. $ 24,600

If the company sells 5,300 units, its net operating income should be closest to:
A) $24,600
B) $2,200
C) $22,874
D) $15,400

7. Sorin Inc., a company that produces and sells a single product, has provided
its contribution format income statement for January.

Sales (4,200 units) .................................... $155,400


Variable expenses ..................................... 100,800
Contribution margin ................................. 54,600
Fixed expenses ......................................... 42,400
Net operating income ............................... $ 12,200

If the company sells 4,600 units, its total contribution margin should be closest
to:
A) $54,600
B) $59,800
C) $69,400
D) $13,362

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.
A) $565,440
B) $654,000
C) $88,560
D) $4,560

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?
A) $23,740
B) $59,740
C) $67,000
D) $7,260
10. Data concerning Kardas Corporation's single product appear below:

Per Unit Percent of Sales


Selling price ................................ $140 100%
Variable expenses ....................... 28 20%
Contribution margin ................... $112 80%

The company is currently selling 8,000 units per month. Fixed expenses are
$719,000 per month. The marketing manager believes that a $20,000 increase
in the monthly advertising budget would result in a 180 unit increase in
monthly sales. What should be the overall effect on the company's monthly
net operating income of this change?
A) decrease of $160
B) increase of $20,160
C) decrease of $20,000
D) increase of $160

11. Data concerning Dorazio Corporation's single product appear below:

Per Unit Percent of Sales


Selling price .............................................. $160 100%
Variable expenses ..................................... 48 30%
Contribution margin ................................. $112 70%

Fixed expenses are $87,000 per month. The company is currently selling
1,000 units per month. Management is considering using a new component
that would increase the unit variable cost by $28. Since the new component
would increase the features of the company's product, the marketing manager
predicts that monthly sales would increase by 400 units. What should be the
overall effect on the company's monthly net operating income of this change?
A) increase of $5,600
B) increase of $33,600
C) decrease of $5,600
D) decrease of $33,600

12. Chovanec Corporation produces and sells a single product. Data concerning
that product appear below:

Per Unit Percent of Sales


Selling price ................................ $170 100%
Variable expenses ....................... 68 40%
Contribution margin ................... $102 60%

Fixed expenses are $521,000 per month. The company is currently selling
7,000 units per month. Management is considering using a new component
that would increase the unit variable cost by $6. 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?
A) decrease of $48,000
B) decrease of $6,000
C) increase of $48,000
D) increase of $6,000

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

Selling price per unit ............................................... $1.80


Contribution margin ratio ........................................ 40%
Total fixed expenses for the year ............................ $218,700

How many units will Hartl have to sell next year in order to break-even?
A) 121,500
B) 202,500
C) 303,750
D) 546,750

14. Borich Corporation produces and sells a single product. Data concerning that
product appear below:

Selling price per unit ................................ $150.00


Variable expense per unit ......................... $73.50
Fixed expense per month .......................... $308,295

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


A) 2,055
B) 4,030
C) 4,194
D) 3,426

15. Data concerning Buchenau Corporation's single product appear below:

Selling price per unit ................................ $150.00


Variable expense per unit ......................... $34.50
Fixed expense per month .......................... $466,620

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


A) 3,111
B) 6,892
C) 4,040
D) 13,525
16. Hevesy Inc. produces and sells a single product. The selling price of the
product is $200.00 per unit and its variable cost is $80.00 per unit. The fixed
expense is $300,000 per month. The break-even in monthly unit sales is
closest to:
A) 2,500
B) 1,500
C) 3,750
D) 2,583

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

Selling price per unit ................................ $130.00


Variable expense per unit ......................... $41.60
Fixed expense per month .......................... $109,616

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


A) $342,550
B) $204,455
C) $109,616
D) $161,200

18. Data concerning Follick Corporation's single product appear below:

Selling price per unit ................................ $110.00


Variable expense per unit ......................... $30.80
Fixed expense per month .......................... $321,552

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


A) $1,148,400
B) $638,851
C) $321,552
D) $446,600

19. 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:


A) $601,500
B) $366,915
C) $636,408
D) $940,808
20. The Saginaw Ice Company had sales of $400,000, with variable expenses of
$162,000 and fixed expenses of $98,000. Which of the following is closest to
Saginaw's break-even point?
A) $260,000
B) $165,000
C) $140,000
D) $238,000

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