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Exam 6: Reporting and Analyzing Inventory

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Question 21

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For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $48.What is the break-even point?

A) $2,083,334 sales dollars
B) $625,000 sales dollars
C) 20,834 units
D) 6,250 units

E) None of the above
F) B) and C)

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Question 22

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In 2012, Raleigh sold 1,000 units at $500 each, and earned net income of $50,000.Variable expenses were $300 per unit, and fixed expenses were $150,000.The same selling price is expected for 2013.Raleigh's variable cost per unit will rise by 10% in 2013 due to increasing material costs, so they are tentatively planning to cut fixed costs by $15,000.How many units must Raleigh sell in 2013 to maintain the same income level as 2012?

A) 794
B) 971
C) 1,176
D) 1,088

E) B) and D)
F) All of the above

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Question 23

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Cost-volume-profit analysis is the study of the effects of

The margin of safety tells a company how far sales can drop before it will be operating at a loss.

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

In a CVP income statement, a selling expense is generally

If contribution margin is $120,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are $\begin{array}{lll}&\text { Variable }& \text { Fixed }\\\text { a. } & \$ 180,000 & \$ 260,000 \\\text { b. } & \$ 180,000 & \$ 80,000 \\\text { c. } & \$ 80,000 & \$ 180,000 \\\text { d. } & \$ 420,000 & \$ 260,000\end{array}$

A cost structure which relies more heavily on fixed costs makes the company

In 2012, Teller Company sold 3,000 units at $400 each.Variable expenses were $280 per unit, and fixed expenses were $180,000.The same selling price, variable expenses, and fixed expenses are expected for 2013.What is Teller's break-even point in sales dollars for 2013?

If Buttercup, Inc.sells two products with a sales mix of 75% : 25%, and the respective contribution margins are $80 and $240, then weighted-average unit contribution margin is $120.

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Net income can be increased or decreased by changing the sales mix.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

In CVP analysis, cost includes manufacturing costs but not selling and administrative expenses.

Mercantile Corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000.Mercantile's degree of operating leverage is

Cost structure refers to the relative proportion of

For Wickham Co., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%.What is required sales in dollars to earn a target net income of $400,000?

Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. -Net income is

In 2012, Hagar Corp.sold 3,000 units at $500 each.Variable expenses were $350 per unit, and fixed expenses were $455,000.The same variable expenses per unit and fixed expenses are expected for 2013.If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2013?

For Franklin, Inc., sales is $1,500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%.What are the total variable expenses?