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Exam 4: Cost-Volume-Profit Relationships

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Question 61

Multiple Choice

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Data concerning Homme Corporation's single product appear below:The company is currently selling 2,000 units per month. Fixed expenses are $130,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Homme Corporation.Refer to the original data when answering this question. The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

A) Increase of $2,440
B) Decrease of $12,000
C) Increase of $14,440
D) Decrease of $2,440

E) None of the above
F) A) and D)

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Question 62

Multiple Choice

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

A) $307,160
B) $164,640
C) $514,640
D) $242,200

E) C) and D)
F) A) and D)

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Question 63

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At the break-even point: Sales - Variable expenses = Fixed expenses.

The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars.

A company that makes organic fertilizer has supplied the following data: -The company's margin of safety in units is closest to:

Lagasca Corporation's contribution format income statement for December appears below: The degree of operating leverage is closest to:

Danneman Corporation's fixed monthly expenses are $13,000 and its contribution margin ratio is 56%.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 $41,000?

Aziz Corporation produces and sells a single product.Data concerning that product appear below: Required: Determine the monthly break-even in either unit or total dollar sales.Show your work!

The contribution margin ratio of Thronson Corporation's only product is 69%.The company's monthly fixed expense is $455,400 and the company's monthly target profit is $41,400. Required: Determine the dollar sales to attain the company's target profit.Show your work!

Laro Corporation produces and sells a single product with the following characteristics:The company is currently selling 5,000 units per month. Fixed expenses are $302,000 per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Laro Corporation.Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $13 and increase the advertising budget by $17,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 1,200 units.What should be the overall effect on the company's monthly net operating income of this change?

A manufacturer of tiling grout has supplied the following data: -The company's break-even in kilograms is closest to:

A manufacturer of tiling grout has supplied the following data: -The company's degree of operating leverage is closest to:

Guitian Corporation produces and sells a single product.The company's contribution format income statement for June appears below: Required: Redo the company's contribution format income statement assuming that the company sells

Robledo Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $625,000 per month. The company is currently selling 9,000 units per month. Consider each of the following questions independently. -This question is to be considered independently of all other questions relating to Robledo Corporation.Refer to the original data when answering this question. The marketing manager would like to introduce sales commissions as an incentive for the sales staff.The marketing manager has proposed a commission of $8 per unit.In exchange,the sales staff would accept a decrease in their salaries of $57,000 per month.(This is the company's savings for the entire sales staff. ) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units.What should be the overall effect on the company's monthly net operating income of this change?

Stanger Inc.produces and sells two products.Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $17,570. Required: a.Determine the overall break-even point for the company.Show your work! b.If the sales mix shifts toward Product N16S with no change in total sales,what will happen to the break-even point for the company? Explain.

The following data were supplied by Reader Corporation: -The contribution margin is:

Kendall Company has sales of 1,000 units at $60 a unit.Variable expenses are 30% of the selling price.If total fixed expenses are $30,000,the degree of operating leverage is:

Data concerning Odum Corporation's single product appear below: The break-even in monthly unit sales is closest to:

Balbuena Corporation produces and sells two products.Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $15,630.If the sales mix were to shift toward Product K87W with total sales dollars remaining constant,the overall break-even point for the entire company:

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.