1. East Company manufactures and sells a single product with a positive contribution
margin. If the selling price and the variable expense per unit both increase 5% and
fixed expenses do not change, what is the effect on the contribution margin per
unit and the contribution margin ratio?
A)
B)
C)
D)
Contribution
margin per
unit
No change
Increase
Increase
Increase
Contributio
n
margin
ratio
No change
Increase
No change
Decrease
2. The contribution margin ratio always increases when the:
A) break-even point increases.
B) break-even point decreases.
C) variable expenses as a percentage of net sales decrease.
D) variable expenses as a percentage of net sales increase.
3. If a company increases its selling price by $2 per unit due to an increase in its variable
labor cost of $2 per unit, the break-even point in units will:
A) decrease.
B) increase.
C) not change.
D) change but direction cannot be determined.
4. The following information relates to the break-even point at Pezzo Corporation:
Sales dollars.....................
Total fixed expenses.........
$120,00
0
$30,000
If Pezzo wants to generate net operating income of $12,000, what will its sales
dollars have to be?
A) $132,000
B) $136,000
C) $168,000
D) $176,000
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5. The following information relates to Snowbird Corporation:
Sales at the break-even point.........
Total fixed expenses......................
Net operating income.....................
$312,50
0
$250,00
0
$150,00
0
What is Snowbird's margin of safety?
A) $62,500
B) $187,500
C) $100,000
D) $212,500
6. The following information relates to Zinc Corporation for last year:
Sales...........................................................
Net operating income.................................
Degree of operating leverage.....................
$500,00
0
$25,000
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Sales at Zinc are expected to be $600,000 next year. Assuming no change in cost
structure, this means that net operating income for next year should be:
A) $30,000
B) $45,000
C) $50,000
D) $125,000
7. Tice Company is a medium-sized manufacturer of lamps. During the year a new line
called “Horolin” was made available to Tice's customers. The break-even point
for sales of Horolin is $200,000 with a contribution margin of 40%. Assuming
that the profit for the Horolin line during the year amounted to $100,000, total
sales during the year would have amounted to:
A) $300,000
B) $420,000
C) $450,000
D) $475,000
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8. Birney Company has prepared the following budget data:
Sales.............................................................. 150,000 units
Selling price.................................................. $25 per unit
Variable expenses......................................... $15 per unit
Fixed manufacturing expenses.....................
$800,000
Fixed selling and admin. expenses...............
$700,000
An advertising agency claims that an aggressive advertising campaign would
enable the company to increase its unit sales by 20%. What is the maximum
amount that the company can pay for advertising and obtain a net operating
income of $200,000?
A) $100,000
B) $200,000
C) $300,000
D) $550,000
9. Moruzzi Corporation is a single-product company that expects the following operating
results for next year:
Sales...........................................................
Contribution margin per unit.....................
Contribution margin ratio..........................
Degree of operating leverage.....................
$320,00
0
$0.20
25%
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How many units would Moruzzi have to sell next year to break-even?
A) 50,000
B) 200,000
C) 280,000
D) 350,000
10. Frank Company manufacturers a single product that has a selling price of $20.00 per
unit. Fixed expenses total $45,000 per year, and the company must sell 5,000
units to break even. If the company has a target profit of $13,500, sales in units
must be:
A) 6,000
B) 5,750
C) 6,500
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D) 7,925
11. Mason Enterprises has prepared the following budget for the month of July:
Selling
price per
unit
Variable
cost per
unit
Product A...............
$10.00
$4.00
Product B...............
Product C...............
$15.00
$18.00
$8.00
$9.00
Unit
sales
15,00
0
20,00
0
5,000
Assuming that total fixed expenses will be $150,000 and the sales mix remains
constant, the break-even point would be closest to:
A) $276,008
B) $235,292
C) $294,545
D) $141,278
12. Mark Corporation produces two models of calculators. The Business model sells for
$60, and the Math model sells for $40. The variable expenses are given below:
Busines
s
Variable production costs per unit...................................
Variable selling and administrative expenses per unit....
Model
$15
$9
Math
Mode
l
$16
$6
The fixed expenses are $75,000 per month. The expected monthly sales of each
model are: Business, 1,000 units; Math, 500 units.
The break-even point for the expected sales mix is (round to nearest whole unit):
A) 833 of each
B) 1,667 Business and 833 Math
C) 1,667 of each
D) 833 Business and 1,667 Math
13. Assume the following cost information for Fernandez Company:
Selling price
Variable costs
$120 per unit
$80 per unit
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Total fixed costs
Tax rate
$80,000
40%
What minimum volume of sales dollars is required to earn an after-tax net income of
$30,000?
A. $465,000
B. $330,000
C. $390,000
D. $165,000
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