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1 . award: 10 out of 10.00 points
Lester Company has a single product. The selling price is $47 and the variable cost is $24 per unit. The company's fixed expense is $230,000 per month. What is the company 's unit contribution margin?
0 $71
0 $47
0 $24
o ® $23
Unit contribution margin = Unit selling price of $47 - Unit variable expenses of $24 = $23
2. award: 10 out of 10.00 points
Tarrington Company manufactured and sold 1,300 units of its product during the current month. The selling price is $44 and the variable cost is $30 per unit. The company's fixed expense is $12,000 per month. If the company sells one additional unit during the month, its total contribution margin w ill increase by:
0 $6,214
0 $6,200
o ® $14
0 $44
For each additional unit the company sells during the month, its total contribution margin w ill increase by its unit contribution margin. Unit contribution margin = Sales per unit of $44 - Variable costs per unit of $30 = $1 4.
3. award: 10 out of 10.00 points All of the following statements are correct except:
0 A cost that is classified as variable w ith respect to one measure of ac tivity could be classified as fixed w ith respect to a different measure of activity.
0 Within the relevant range, a change in activity results in a change in the per unit fixed cost.
o l!l Within the relevant range, a change in activity results in a change in the per unit variable cost.
0 A variable cost changes in total as activity changes but remains constant on a per unit basis over the relevant range.
W ithin the relevant range, a change in activ ity results in a change in total variable cost (rather than the per unit variable cost).
4. award: 10 out of 10.00 points
Douglas Company sold 1,800 units of its produc t during the current month. The selling price is $71 and the variable cost is $46 per unit. The company's fixed expense totals $9,200 per month. The company's profit 1s:
0 $92,000
0 $118,600
o ® $35,000
0 $45,000
Profit = (Selling price per unit of $71 x Quantity sold of 1,800) - (Variable expenses per unit of $46 x Quantity sold of 1,800) - Fixed expenses of $9,200 = $35,800
5. award: 10 out of 10.00 points
Lester Company has a single product. The selling price is $40 and the variable cost is $10 per unit. The company 's fixed expense is $312,000 per month. What is the company's contribution margin ratio?
0 25%
0 35%
o ® 75%
0 30%
Contribution margin ratio= Unit contribution margin of $30.;. Unit selling price of $40 = 0. 75 or 75%
6. award: 10 out of 10.00 points
Parker Company has provided the following data for the most recent year: net operating income, $35, 000; fixed expense. $77,500; sales, $225,000; and CM ratio, 50%. What is the company's total contribution margin?
0 $35,000
o® $112,500
0 $190,000
0 $147,500
Sales $225,000 CM ratio x .50
Contribution margin $112,500
7. award: 10 out of 10.00 points Redford, Inc. has provided the following data:
Sales price Sales Fixed cost Variable cost
$ 210 per unit 5,900 units
$ 298,000 $ 105 per unit
If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net income w ill:
0 increase by $443,050.
0 decrease by $59,600.
o ® increase by $121,550.
0 increase by $61,950.
Sales (5,900 x $210) Less variable expenses (5,900 x $105)
Contribution margin Less fixed expenses
Cale ulations: (1) $619,500 x 10% = $61,950 (2) $298,000 x 20% = $59,600
Current $1 ,239,000
619,500
619,500 298,000
Change Revised
$ 61 ,950 (1 ) $681,450 (59,600) (2) 238,400
8. award: 10 out of 10.00 points
Marino Company is currently selling 11,200 units of its product per month at $11 per unit for total monthly sales of $123,200. The company's variable expenses are $5 per unit and its monthly fixed expenses total $1 1,200. An increase in the advertising budget of $5,200 is expected to increase its monthly sales by 2,200 units for total monthly sales of $1 47,400. This proposal will cause net operating income to:
0 Increase by $16,000
0 ® Increase by $8,000
0 Decrease by $13,200
0 Decrease by $8,000
Increase in sales of $24,200 (or $147,400 - $123,200) - Increase in variable costs of $11,000 (or 2,200 x $5 per unit) - Increase in fixed costs of $5,200 = Increase in net operating income of $8,000
9. award: 10 out of 10.00 points ................................................................................................................................................................................................................................................................................................................................................... _
Astair, Inc . reported sales of $8,020,000 for the month and incurred variable expenses totaling $5,453,600 and fixed expenses totaling $1 ,360,000. The company has no beginning or ending inventories. A total of 80,200 units were produced and sold last month. How many units would the company have to sell to achieve a desired profit of $1 ,462,400?
0 42,500 units
0 125,900 units
o ® 88,200 units
0 122,700 units
First, determine the contribution margin (CM) per unit as follows. Total contribution margin/Number of units sold = CM per unit $2,566,400/80,200 = $32 per unit Then, the total unit sales required to achieve the desired targeted profit is determined as follows. Break-even point in units = (Fixed expenses+ Desired targeted profit) .;. CM per unit Break-even point (in units) = ($1 ,360,000 + $1 ,462,400) .;. $32 per unit= 88,200 units
10. award: 10 out of 10.00 points
Lester Company has a single product. The selling price is $40 and the variable cost is $24 per unit. The company's fixed expense is $1 44,000 per month. How many units would the company have to sell to break-even?
0 10,913 units
0 7,200 units
o ® 9,000 units
0 3,800 units
Unit contribution margin = Unit selling price of $40 - Unit variable expenses of $24 = $1 6 Unit sales to break even = Target profit of $1 44,000.;. Unit CM of $1 6 = 9,000 units
11 . award: 10 out of 10.00 points Lester Company has a single product. The selling price is $30 and the variable cost is $18.00 per unit. The company 's fixed expense is $300,000 per month. W hat is the company 's break-even in sales dollars? (Do not round intermediate calculations.)
o ® $750,000
0 $500,000
0 $450,000
0 $360,000
Unit contribution margin = Unit selling price of $30 - Unit variable expenses of $18.00 = $12.00 Contribution margin ratio= Unit contribution margin of $12.00.;. Unit selling price of $30 = 0. 40 or 40% Dollar sales to break even = Fixed expenses of $300,000.;. CM ratio of 0.40 = $750,000
12. award: 10 out of 10.00 points Parker Company has provided the follow ing data for the most recent year: net operating income, $43,000; fixed expense, $63,000; sales, $265,000; and CM ratio, 40%. The company's margin of safety in dollars is: (Round your intermediate and final answers to the nearest dollar amount.)
Q $150,500
0 $157,500
Q $43,000
o @ $107,500
Dollar sales to break even = Fixed expenses of $63,000.;. CM ratio of .40 = $157,500 Margin of safety in dollars = Actual sales of $265,000 - Break even sales of $157,500 = $107,500
13. award: 10 out of 10.00 points
Parker Company has provided the following data for the most recent year: net operating income, $40,000; fixed expense, $60,000; sales, $250,000; and CM ratio, 30%. The margin of safety in percentage form is: (Round your intermediate and final answers to the nearest whole number.)
0 80%
0 70%
o ® 20%
0 30%
Dollar sales to break even = Fixed expenses of $60,000 ~CM ratio of 0.30 = $200,000 Margin of safety in dollars = Actual sales of $250,000 - Break even sales of $200,000 = $50,000 Margin of safety percentage = Margin of safety of $50,000 ~Actual sales of $250,000 = 20%
14. award: 10 out of 10.00 points
If sales increase from $408,000 to $475,320, and if the degree of operating leverage is 5, net operating income should increase by: (Do not round intermediate calculations.)
o ® a2.5o%
0 49.50%
0 16.50%
0 71.00%
Percentage change in sales = ($475,320 - $408,000) .,. $408,000 = 16.50%
Pere entage change in dollar sales Degree of operating leverage
Percentage change in net operating income
16.50% x 5
82.50%
15. award: 10 out of 10.00 points
Parker Company has prov ided the following data for the most recent year. net operating income, $36,000; fixed expense, $79,000; sales, $230,000; and CM ratio, 50%.What is the company 's degree of operating leverage?
0 6.39
0 1.31
0 2.00
o ® 3.19
Contribution margin Net operating income
Operating leverage
$ 115,000 .;. $ 36,000
3. 19
16. award: 10 out of 10.00 points
Astair, Inc . reported sales of $7, 198,400 for the month and incurred variable expenses totaling $5,317,000 and fixed expenses totaling $1,308,700. The company has no beginning or ending inventories. A total of 81,800 units were produced and sold last month. What is the company 's degree of operating leverage?
0 2.29
0 3.83
o ® 3.29
0 1.44
The company 's degree of operating leverage is determined as follows. Degree of operating leverage = Contribution margin.;. Net operating income Degree of operating leverage = $1 ,881,400 .;. $572,700 = 3.29
17. award: 10 out of 10.00 points
In multiple produc t companies, a shift in the sales mix from less profitable produc ts to more profitable produc ts will cause the company's break-even point to:
0 increase
o <!> decrease
0 notchange
0 none of these
A shift to more profitable products would result in an increase in the overall CM ratio. Thus, fewer sales would be needed to cover the fixed costs and the break-even would therefore decrease.
18. award: 10 out of 10.00 points
Herman Corp. has two products, A and B, with the following total sales and total variable costs: (Round your final answer to the nearest whole percent.)
Sales Variable expenses
Product A $ 13,200 $ 7,920
Product B $ 38,000 $ 22,800
What is the overall contribution margin ratio?
0 54%
o ® 40%
0 60%
0 74%
Sales Variable expenses
Product A Product B Total $ 13,200 $38,000 $51,200
7,920 22,800 30,720
Contribution margin $ 5,280 $15,200 $20.480
Overall CM ratio = $20,480 + $51,200 = 40%
• 180 outof180points(100%)
