ACTG-INT02.2020.B1
Page 1 of 19
ICCT Colleges Foundation Inc.
V.V Soliven Ave. II, Cainta, Rizal
College of Business and Accountancy
ACCOUNTING INTEGRATION PART 2
RBR BACAY, CPA, MBA,FRIAcc,CB
I. COST VOLUME PROFIT ANALYSIS
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. Which of the following statements is correct with regard to a CVP graph?
A)
A CVP graph shows the maximum possible profit.
B)
A CVP graph shows the break-even point as the intersection of the total sales revenue line and the
total expense line.
C)
A CVP graph assumes that total expense varies in direct proportion to unit sales.
D)
A CVP graph shows the operating leverage as the gap between total sales revenue and total expense
at the actual level of sales.
3. If both the fixed and variable expenses associated with a product decrease, what will be the effect on the
contribution margin ratio and the break-even point, respectively?
A)
B)
C)
D)
Contribution margin ratio
Decrease
Increase
Decrease
Increase
Break-even point
Increase
Decrease
Decrease
Increase
4. Which of the following is true regarding the contribution margin ratio of a single product company?
A)
As fixed expenses decrease, the contribution margin ratio increases.
B)
The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per
unit.
C)
D)
The contribution margin ratio will decline as unit sales decline.
The contribution margin ratio equals the selling price per unit less the variable expense ratio.
5. 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.
6. 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.
7. 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.
8. Which of the following strategies could be used to reduce the break-even point?
A)
B)
C)
D)
Fixed expenses
Increase
Decrease
Decrease
Increase
Contribution margin
Increase
Decrease
Increase
Decrease
9. Break-even analysis assumes that:
A)
Total revenue is constant.
B)
Unit variable expense is constant.
C)
Unit fixed expense is constant.
D)
Selling prices must fall in order to generate more revenue.
ACTG-INT02.2020.B1
Page 2 of 19
Ans: B
Level: Easy
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 5
10. Target profit analysis is used to answer which of the following questions?
A)
What sales volume is needed to cover all expenses?
B)
What sales volume is needed to cover fixed expenses?
C)
What sales volume is needed to earn a specific amount of net operating income?
D)
What sales volume is needed to avoid a loss?
11. The margin of safety can be calculated by:
A)
Sales − (Fixed expenses/Contribution margin ratio).
B)
Sales − (Fixed expenses/Variable expense per unit).
C)
Sales − (Fixed expenses + Variable expenses).
D)
Sales − Net operating income.
12. If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four
percent change in:
A)
unit contribution margin.
B)
revenue.
C)
variable expense.
D)
net operating income.
13. Which of the following is the correct calculation for the degree of operating leverage?
A)
net operating income divided by total expenses.
B)
net operating income divided by total contribution margin.
C)
total contribution margin divided by net operating income.
D)
variable expense divided by total contribution margin.
14. Which of the following is an assumption underlying standard CVP analysis?
A)
In multiproduct companies, the sales mix is constant.
B)
In manufacturing companies, inventories always change.
C)
The price of a product or service is expected to change as volume changes.
D)
Fixed expenses will change as volume increases.
15. Hopi Corporation expects the following operating results for next year:
Sales................................................................
Margin of safety...............................................
Contribution margin ratio.................................
Degree of operating leverage..........................
$400,000
$100,000
75%
4
What is Hopi expecting total fixed expenses to be next year?
A)
$75,000
B)
$100,000
C)
$200,000
D)
$225,000
16. 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
17. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution
format income statement for November.
Sales (5,700 units).................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$319,200
188,100
131,100
106,500
$ 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
18. Sorin Inc., a company that produces and sells a single product, has provided its contribution format income
statement for January.
Sales (4,200 units)..............................
ACTG-INT02.2020.B1
$155,400
Page 3 of 19
Variable expenses..............................
Contribution margin............................
Fixed expenses...................................
Net operating income..........................
100,800
54,600
42,400
$ 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
19. Decaprio Inc. produces and sells a single product. The company has provided its contribution format
income statement for June.
Sales (8,800 units)..............................
Variable expenses..............................
Contribution margin............................
Fixed expenses...................................
Net operating income..........................
$528,000
290,400
237,600
211,700
$ 25,900
If the company sells 9,200 units, its net operating income should be closest to:
A)
$27,077
B)
$49,900
C)
$36,700
D)
$25,900
20. The margin of safety in the Flaherty Company is $24,000. If the company's sales are $120,000 and its
variable expenses are $80,000, its fixed expenses must be:
A)
$8,000
B)
$32,000
C)
$24,000
D)
$16,000
21. Holt Company's variable expenses are 70% of sales. At a $300,000 sales level, the degree of operating
leverage is 10. If sales increase by $60,000, the degree of operating leverage will be:
A)
12
B)
10
C)
6
D)
4
22. 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
23. 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
24. Creswell Corporation's fixed monthly expenses are $29,000 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 $95,000?
A)
$12,800
B)
$24,200
C)
$53,200
D)
$66,000
25. Data concerning Kardas Corporation's single product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$140
28
$112
Percent of Sales
100%
20%
80%
The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The
ACTG-INT02.2020.B1
Page 4 of 19
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
26. Kuzio Corporation produces and sells a single product. Data concerning that product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$130
78
$ 52
Percent of Sales
100%
60%
40%
The company is currently selling 6,000 units per month. Fixed expenses are $263,000 per month. The
marketing manager believes that a $5,000 increase in the monthly advertising budget would result in a 140 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 $2,280
B)
increase of $7,280
C)
decrease of $5,000
D)
decrease of $2,280
27. Data concerning Dorazio Corporation's single product appear below:
Selling price........................................
Variable expenses..............................
Contribution margin............................
Per Unit
$160
48
$112
Percent of Sales
100%
30%
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
28. Chovanec Corporation produces and sells a single product. Data concerning that product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$170
68
$102
Percent of Sales
100%
40%
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
29. Fixed expenses are $531,000 per month. The company is currently selling 4,000 units per month. The
marketing manager would like to cut the selling price by $14 and increase the advertising budget by
$35,000 per month. The marketing manager predicts that these two changes would increase monthly sales
by 500 units. What should be the overall effect on the company's monthly net operating income of this
change?
A)
decrease of $18,000
B)
increase of $38,000
C)
decrease of $38,000
D)
increase of $58,000
30. Cobble Corporation produces and sells a single product. Data concerning that product appear below:
Selling price...........................
ACTG-INT02.2020.B1
Per Unit
$160
Percent of Sales
100%
Page 5 of 19
Variable expenses.................
Contribution margin................
48
$112
30%
70%
Fixed expenses are $499,000 per month. The company is currently selling 5,000 units per month. The
marketing manager would like to cut the selling price by $13 and increase the advertising budget by $33,000 per
month. The marketing manager predicts that these two changes would increase monthly sales by 900 units. What
should be the overall effect on the company's monthly net operating income of this change?
A)
increase of $56,100
B)
decrease of $8,900
C)
increase of $99,300
D)
decrease of $56,100
31. Data concerning Bazin Corporation's single product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$100
20
$ 80
Percent of Sales
100%
20%
80%
Fixed expenses are $384,000 per month. The company is currently selling 6,000 units per month. The
marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing
manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their
salaries of $46,000 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 500 units. What should be the overall
effect on the company's monthly net operating income of this change?
A)
increase of $27,500
B)
decrease of $64,500
C)
increase of $41,500
D)
increase of $507,500
32. Sannella Corporation produces and sells a single product. Data concerning that product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$220
66
$154
Percent of Sales
100%
30%
70%
Fixed expenses are $991,000 per month. The company is currently selling 8,000 units per month. The
marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing
manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept a decrease in their
salaries of $74,000 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 200 units. What should be the overall
effect on the company's monthly net operating income of this change?
A)
increase of $1,246,600
B)
increase of $14,600
C)
decrease of $133,400
D)
increase of $71,800
33. Cherry Street Market reported the following information for the sales of their only product, cherries sold by
the pint:
Sales......................................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
Total
$31,500
9,450
22,050
13,000
$ 9,050
Per Unit
$4.50
1.35
$3.15
Cherry Street would like to increase their selling price by 50 cents per unit, and feel that this will decrease
sales volume by 10%. Should Cherry Street increase the price, and what will the effect be on net operating income?
A)
Yes; $3,500 increase
B)
Yes; $945 increase
C)
No; no change
D)
No; $945 decrease
34. A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the
product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of
safety is:
A)
$32,000
B)
$96,000
C)
$128,000
D)
$192,000
ACTG-INT02.2020.B1
Page 6 of 19
35. The following data are available for the Phelps Company for a recent month:
Sales......................................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
Product A
$150,000
91,000
$ 59,000
Product B
$130,000
104,000
$ 26,000
Product C
$90,000
27,000
$63,000
Total
$370,000
222,000
148,000
55,000
$ 93,000
The break-even sales for the month for the company are:
A)
$91,667
B)
$203,000
C)
$148,000
D)
$137,500
36. Hartl Corporation is a single product firm with the following selling price and cost structure for next year:
Selling price per unit........................................
Contribution margin ratio.................................
Total fixed expenses for the year.....................
$1.80
40%
$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
37. Borich Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$150.00
$73.50
$308,295
The break-even in monthly unit sales is closest to:
A)
2,055
B)
4,030
C)
4,194
D)
3,426
38. Data concerning Buchenau Corporation's single product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$150.00
$34.50
$466,620
The break-even in monthly unit sales is closest to:
A)
3,111
B)
6,892
C)
4,040
D)
13,525
39. 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
40. Wenstrom Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$130.00
$41.60
$109,616
The break-even in monthly dollar sales is closest to:
A)
$342,550
B)
$204,455
C)
$109,616
ACTG-INT02.2020.B1
Page 7 of 19
D)
$161,200
41. Data concerning Follick Corporation's single product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$110.00
$30.80
$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
42. 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
43. Caneer Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$240.00
$81.60
$997,920
The unit sales to attain the company's monthly target profit of $44,000 is closest to:
A)
7,896
B)
12,769
C)
6,578
D)
4,341
44. Enterprises Corporation's single product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$160.00
$65.60
$387,040
The unit sales to attain the company's monthly target profit of $17,000 is closest to:
A)
6,159
B)
4,280
C)
2,525
D)
4,321
45. Hettrick International Corporation's only product sells for $120.00 per unit and its variable expense is
$52.80. The company's monthly fixed expense is $396,480 per month. The unit sales to attain the
company's monthly target profit of $13,000 is closest to:
A)
7,755
B)
6,093
C)
5,753
D)
3,412
46. Logsdon Corporation produces and sells a single product whose contribution margin ratio is 63%. The
company's monthly fixed expense is $720,720 and the company's monthly target profit is $28,000. The
dollar sales to attain that target profit is closest to:
A)
$471,694
B)
$454,054
C)
$1,188,444
D)
$1,144,000
47. Majid Corporation sells a product for $240 per unit. The product's current sales are 41,300 units and its
break-even sales are 36,757 units.
What is the margin of safety in dollars?
A)
$8,821,680
B)
$6,608,000
C)
$9,912,000
D)
$1,090,320
48. Mcmurtry Corporation sells a product for $170 per unit. The product's current sales are 10,000 units and its
ACTG-INT02.2020.B1
Page 8 of 19
A)
B)
C)
D)
break-even sales are 8,100 units. The margin of safety as a percentage of sales is closest to:
23%
81%
19%
77%
49. Cubie Corporation has provided the following data concerning its only product:
Selling price...........................
Current sales.........................
Break-even sales...................
$100 per unit
10,600 units
9,540 units
What is the margin of safety in dollars?
A)
$1,060,000
B)
$106,000
C)
$954,000
D)
$706,667
50. Ensley Corporation has provided the following data concerning its only product:
Selling price...........................
Current sales.........................
Break-even sales...................
$200 per unit
30,300 units
21,816 units
The margin of safety as a percentage of sales is closest to:
A)
61%
B)
28%
C)
72%
D)
39%
51. The February contribution format income statement of Mcabier Corporation appears below:
a. Degree of operating leverage = Contribution margin/Net operating income
= $251,100/$41,300 = 6.08
b. Percent increase in net operating income
= Percent increase in sales × Degree of operating leverage
= 19% × 6.08 = 115.52%
Sales......................................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$211,200
96,000
115,200
84,100
$ 31,100
The degree of operating leverage is closest to:
A)
0.27
B)
6.79
C)
3.70
D)
0.15
52. Serfass Corporation's contribution format income statement for July appears below:
Sales......................................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$260,000
176,000
84,000
71,800
$ 12,200
The degree of operating leverage is closest to:
A)
0.05
B)
0.15
C)
21.31
D)
6.89
53. Rushenberg Corporation's operating leverage is 10.8. If the company's sales increase by 14%, its net
operating income should increase by about:
A)
151.2%
B)
14.0%
C)
77.1%
D)
10.8%
54. Bendel Inc. has an operating leverage of 7.3. If the company's sales increase by 3%, its net operating
income should increase by about:
ACTG-INT02.2020.B1
Page 9 of 19
A)
B)
C)
D)
243.3%
7.3%
21.9%
3.0%
55. Mcdale Inc. produces and sells two products. Data concerning those products for the most recent month
appear below:
Product I49V
$15,000
$3,300
Sales......................................
Variable expenses.................
Product Z50U
$14,000
$2,790
The fixed expenses of the entire company were $18,460. The break-even point for the entire company is
closest to:
A)
$23,367
B)
$10,540
C)
$24,550
D)
$18,460
56. Roddam Corporation produces and sells two products. Data concerning those products for the most recent
month appear below:
Sales......................................
Variable expenses.................
Product K09E
$28,000
$11,200
Product G17B
$38,000
$8,600
The fixed expenses of the entire company were $41,970. If the sales mix were to shift toward Product K09E
with total sales remaining constant, the overall break-even point for the entire company:
A)
would increase.
B)
could increase or decrease.
C)
would not change.
D)
would decrease.
57. Newham Corporation produces and sells two products. In the most recent month, Product R10L had sales
of $28,000 and variable expenses of $6,440. Product X96N had sales of $22,000 and variable expenses of
$7,560. And the fixed expenses of the entire company were $32,710. The break-even point for the entire
company is closest to:
A)
$32,710
B)
$45,431
C)
$46,710
D)
$17,290
58. Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of
$24,000 and variable expenses of $6,480. Product Y45E had sales of $29,000 and variable expenses of
$11,010. And the fixed expenses of the entire company were $32,280. If the sales mix were to shift toward
Product C90B with total sales remaining constant, the overall break-even point for the entire company:
A)
would decrease.
B)
would increase.
C)
could increase or decrease.
D)
would not change.
59. Zachary's Bike Shop sells two products. Sales and contribution margin ratios for the two products follow:
Sales in dollars...................................
Contribution margin ratio....................
Product A
$10,000
25%
Product B
$40,000
75%
Given these data, the contribution margin ratio for the company as a whole would be:
A)
25%
B)
50%
C)
65%
D)
It is impossible to determine from the given data.
Use the following to answer questions 61-63:
Righway Corporation has supplied the following data:
Sales per period..................................
Selling price........................................
Variable manufacturing cost...............
Selling expenses.................................
Administration expenses.....................
ACTG-INT02.2020.B1
1,000 units
$50 per unit
$20 per unit
$10,000 plus 5% of sales
$5,000 plus 15% of sales
Page 10 of 19
60. The total contribution margin per period is:
A)
$22,500
B)
$27,500
C)
$30,000
D)
$20,000
61. The break-even point per period is (round to nearest unit):
A)
750 units
B)
545 units
C)
500 units
D)
667 units
62. If the selling price is changed to $55 per unit, the break-even point will be (round to nearest unit):
A)
667 units
B)
545 units
C)
625 units
D)
500 units
Use the following to answer questions 64-66:
Biskra Corporation is a single product firm that expects the following operating results next year:
In Total
Sales...................................... $288,000
Variable expenses................. $172,800
Fixed expenses...................... $72,000
Per Unit
$0.80
$0.48
$0.20
63. Every unit that Biskra sells next year after the break-even point will increase net operating income by:
A)
$0.12
B)
$0.20
C)
$0.32
D)
$0.60
64. What would Biskra's total sales dollars have to be next year to generate $180,000 of net operating
income?
A)
$450,000
B)
$630,000
C)
$588,000
D)
$787,500
65. What is Biskra's margin of safety percentage?
A)
15%
B)
24%
C)
37.5%
D)
40%
Use the following to answer questions 66-67:
Keomuangtai Corporation produces and sells a single product. The company has provided its contribution format
income statement for October.
Sales (4,600 units).................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$266,800
179,400
87,400
62,200
$ 25,200
66. If the company sells 4,500 units, its total contribution margin should be closest to:
A)
$85,500
B)
$24,652
C)
$87,400
D)
$81,600
67. If the company sells 4,200 units, its net operating income should be closest to:
A)
$17,600
B)
$23,009
C)
$25,200
D)
$2,000
ACTG-INT02.2020.B1
Page 11 of 19
Use the following to answer questions 68-69:
Souza Inc, which produces and sells a single product, has provided its contribution format income statement for
October.
Sales (4,000 units).................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$88,000
40,000
48,000
41,700
$ 6,300
68. If the company sells 3,600 units, its total contribution margin should be closest to:
A)
$39,200
B)
$5,670
C)
$43,200
D)
$48,000
69. If the company sells 3,500 units, its net operating income should be closest to:
A)
$5,513
B)
$6,300
C)
$300
D)
-$4,700
Use the following to answer questions 70-71:
The following information relates to Francisca Company:
Degree of operating leverage.............
Profit margin percentage....................
Margin of safety percentage...............
Contribution margin ratio....................
2.5
24%
40%
60%
70. If Francisca's sales increase by 20%, by what percentage will its net operating income increase?
A)
4.8%
B)
8%
C)
12%
D)
50%
71. Francisca wants to give its sales staff a $60,000 increase in salary but still wants to make the same net
operating income. If Francisca gives this increase, by how much would sales at Francisca have to increase
in order for the company to maintain its current net operating income level?
A)
$60,000
B)
$100,000
C)
$150,000
D)
$250,000
Use the following to answer questions 72-76:
The following data relate to a company that produces and sells a travel guide that is updated monthly:
Fixed costs:
Copy editing.....................................................
Art work...........................................................
Typesetting......................................................
Variable costs:
Printing and binding.........................................
Bookstore discounts........................................
Salespersons’ commissions............................
Author’s royalties.............................................
$6,000
$2,000
$72,000
$3.20 per copy
$4.00 per copy
$0.50 per copy
$2.00 per copy
Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July.
72. The unit contribution margin per book is:
A)
$10.30
B)
$14.30
C)
$10.80
D)
$8.30
73. The contribution margin ratio for the book is:
A)
71.5%
B)
54.0%
ACTG-INT02.2020.B1
Page 12 of 19
C)
D)
51.5%
51.9%
74. The break-even point in units is:
A)
8,247 books
B)
7,767 books
C)
7,407 books
D)
6,504 books
75. The degree of operating leverage for July is:
A)
the same as that for June
B)
higher than that for June
C)
lower than that for June
D)
not determinable
76. The degree of operating leverage for July is closest to:
A)
4.48
B)
3.48
C)
4.22
D)
8.70
Use the following to answer questions 77-79:
A manufacturer of cedar shingles has supplied the following data:
Bundles of cedar shakes produced and sold................
Sales revenue..............................................................
Variable manufacturing expense..................................
Fixed manufacturing expense......................................
Variable selling and administrative expense.................
Fixed selling and administrative expense.....................
Net operating income...................................................
360,000
$2,412,000
$1,170,000
$714,000
$414,000
$82,000
$32,000
77. The company's break-even in unit sales is closest to:
A)
118,806
B)
206,957
C)
346,087
D)
14,775
78. The company's contribution margin ratio is closest to:
A)
72.6%
B)
65.7%
C)
34.3%
D)
27.4%
79. The company's degree of operating leverage is closest to:
A)
11.25
B)
25.88
C)
1.99
D)
75.38
Use the following to answer questions 80-81:
(CPA, adapted) The Maxwell Company manufactures and sells a single product. Budgeted data follow:
Forecasted annual sales volume.....................
Selling price per unit........................................
Variable expenses per unit:
Raw materials..................................................
Direct labor......................................................
Manufacturing overhead..................................
Selling expenses.............................................
Total variable expenses per unit......................
Annual fixed expenses:
Manufacturing overhead..................................
Selling and administrative................................
Total fixed expenses........................................
120,000 units
$25.00
$11.00
5.00
2.50
1.30
$19.80
$192,000
276,000
$468,000
80. Maxwell's break-even point in units is:
A)
76,667
B)
90,000
C)
130,000
ACTG-INT02.2020.B1
Page 13 of 19
D)
72,000
81. If Maxwell Company's direct labor costs increase 8 percent, what selling price per unit of product must it
charge to maintain the same contribution margin ratio?
A)
$25.51
B)
$27.00
C)
$25.40
D)
$26.64
Use the following to answer questions 82-83
The following data was provided by Green Corporation:
Sales in dollars...................................
Contribution margin ratio....................
Product A
$80,000
30%
Product B
$120,000
45%
Product C
$100,000
27%
82. The contribution margin ratio for the company as a whole is:
A)
34%
B)
65%
C)
35%
D)
66.7%
83. If total units sold remain unchanged, but the sales mix shifts more heavily toward Product B, one would
expect the overall contribution margin ratio to:
A)
increase
B)
decrease
C)
remain unchanged
D)
none of these
Use the following to answer questions 84-85:
Mrs. Rafter has supplied the following data for her small business:
Selling price...........................
Variable expenses.................
Rent.......................................
Salaries..................................
Other fixed expenses.............
$10 per unit
$6 per unit
$400 per week
$600 per week
$200 per week
84. If 500 units are sold in a week, the net operating income (loss) would be:
A)
$1,800
B)
$(2,000)
C)
$2,000
D)
$800
85. If sales commissions $(1.00 per unit) are discontinued in favor of a $300 increase in salaries, the breakeven point in units would:
A)
increase
B)
decrease
C)
remain the same
D)
none of these
Use the following to answer questions 86-89:
Next year, Rad Shirt Company expects to sell 32,000 shirts. Rad is budgeting the following operating results for next
year:
Sales...................................................
Variable expenses..............................
Contribution margin............................
Fixed expenses...................................
Net operating income..........................
$800,000
288,000
512,000
192,000
$320,000
86. What is Rad's margin of safety for next year?
A)
$480,000
B)
$500,000
C)
$512,000
D)
$608,000
ACTG-INT02.2020.B1
Page 14 of 19
87. What is Rad's degree of operating leverage for next year?
A)
1.50
B)
1.56
C)
1.60
D)
2.50
88. How many shirts would Rad have to sell next year in order to generate $480,000 of net operating income?
A)
38,400
B)
48,000
C)
60,000
D)
42,000
89. Rad is considering increasing its advertising by $48,000 next year. By how much would sales have to
increase in order for Rad to still generate a $320,000 net operating income?
A)
$48,000
B)
$75,000
C)
$76,800
D)
$120,000
Use the following to answer questions 90-93:
Houpe Corporation produces and sells a single product. Data concerning that product appear below:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$140
42
$ 98
Percent of Sales
100%
30%
70%
Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Consider each of the
following questions independently.
90. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer
to the original data when answering this question.
The marketing manager believes that a $14,000 increase in the monthly advertising budget would result in a
150 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 $700
B)
increase of $14,700
C)
decrease of $14,000
D)
decrease of $700
91. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer
to the original data when answering this question.
Management is considering using a new component that would increase the unit variable cost by $5. Since the
new component would increase the features of the company's product, the marketing manager predicts that monthly
sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of
this change?
A)
decrease of $2,100
B)
decrease of $27,900
C)
increase of $2,100
D)
increase of $27,900
92. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer
to the original data when answering this question.
The marketing manager would like to cut the selling price by $7 and increase the advertising budget by
$28,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500
units. What should be the overall effect on the company's monthly net operating income of this change?
A)
decrease of $17,500
B)
increase of $17,500
C)
decrease of $24,500
D)
increase of $38,500
93. This question is to be considered independently of all other questions relating to Houpe 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 $11 per unit. In exchange, the sales staff would accept a decrease
in their salaries of $58,000 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?
A)
increase of $700
B)
increase of $56,900
C)
decrease of $115,300
D)
increase of $588,700
ACTG-INT02.2020.B1
Page 15 of 19
Use the following to answer questions 94-97
Data concerning Lemelin Corporation's single product appear below:
Selling price........................................
Variable expenses..............................
Contribution margin............................
Per Unit
$230
115
$115
Percent of Sales
100%
50%
50%
The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month. Consider each of the
following questions independently.
94. This question is to be considered independently of all other questions relating to Lemelin Corporation.
Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit variable cost by $3. Since the
new component would increase the features of the company's product, the marketing manager predicts that monthly
sales would increase by 200 units. What should be the overall effect on the company's monthly net operating income of
this change?
A)
decrease of $22,400
B)
decrease of $1,400
C)
increase of $22,400
D)
increase of $1,400
95. This question is to be considered independently of all other questions relating to Lemelin Corporation.
Refer to the original data when answering this question.
The marketing manager believes that a $11,000 increase in the monthly advertising budget would result in a
100 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 $11,000
B)
increase of $11,500
C)
decrease of $500
D)
increase of $500
96. This question is to be considered independently of all other questions relating to Lemelin 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 $20 per unit. In exchange, the sales staff would accept a decrease
in their salaries of $113,000 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 300 units. What should be the
overall effect on the company's monthly net operating income of this change?
A)
decrease of $224,500
B)
increase of $107,000
C)
increase of $1,500
D)
increase of $806,500
97. This question is to be considered independently of all other questions relating to Lemelin Corporation.
Refer to the original data when answering this question.
The marketing manager would like to cut the selling price by $18 and increase the advertising budget by
$37,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,600
units. What should be the overall effect on the company's monthly net operating income of this change?
A)
increase of $118,200
B)
increase of $302,200
C)
decrease of $118,200
D)
decrease of $7,800
Use the following to answer questions 98-101:
Thornbrough Corporation produces and sells a single product with the following characteristics:
Selling price...........................
Variable expenses.................
Contribution margin................
Per Unit
$220
44
$176
Percent of Sales
100%
20%
80%
The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. Consider each of the
following questions independently.
98. This question is to be considered independently of all other questions relating to Thornbrough Corporation.
Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit variable cost by $11. 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
ACTG-INT02.2020.B1
Page 16 of 19
income of this change?
A)
increase of $82,500
B)
decrease of $5,500
C)
decrease of $82,500
D)
increase of $5,500
99. This question is to be considered independently of all other questions relating to Thornbrough Corporation.
Refer to the original data when answering this question.
The marketing manager believes that a $28,000 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)
decrease of $28,000
B)
increase of $33,440
C)
increase of $5,440
D)
decrease of $5,440
100.
This question is to be considered independently of all other questions relating to Thornbrough
Corporation. Refer to the original data when answering this question.
The marketing manager would like to cut the selling price by $18 and increase the advertising budget by
$53,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,000
units. What should be the overall effect on the company's monthly net operating income of this change?
A)
decrease of $105,000
B)
increase of $149,000
C)
increase of $105,000
D)
decrease of $21,000
101.
This question is to be considered independently of all other questions relating to Thornbrough
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 $11 per unit. In exchange, the sales staff would accept a decrease
in their salaries of $65,000 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 300 units. What should be the
overall effect on the company's monthly net operating income of this change?
A)
increase of $1,269,500
B)
increase of $37,500
C)
increase of $61,700
D)
decrease of $92,500
Use the following to answer questions 102-103:
Tricia Corporation is a single product firm that sells its product for $2.50 per unit. Variable expense per unit at Tricia is
$1.00. Tricia expects fixed expenses to total $18,000 for next year.
102.
A)
B)
C)
D)
How many units would Tricia have to sell next year in order to break-even?
7,200
12,000
30,000
45,000
103.
What would Tricia's total sales dollars have to be next year in order to generate $45,000 of net
operating income?
A)
$30,000
B)
$42,000
C)
$75,000
D)
$105,000
Use the following to answer questions 104-105
Zanetti Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$110.00
$34.10
$132,066
104.
A)
B)
C)
D)
The break-even in monthly unit sales is closest to:
3,873
1,740
1,201
2,271
105.
A)
B)
The break-even in monthly dollar sales is closest to:
$191,400
$249,810
ACTG-INT02.2020.B1
Page 17 of 19
C)
D)
$426,030
$132,110
Use the following to answer questions 106-108
Data concerning Sinisi Corporation's single product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$200.00
$58.00
$407,540
106.
A)
B)
C)
D)
The break-even in monthly unit sales is closest to:
2,038
7,027
2,870
3,978
107.
A)
B)
C)
D)
The break-even in monthly dollar sales is closest to:
$407,600
$1,405,400
$574,000
$795,600
Use the following to answer questions 108-109:
Maziarz Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$220.00
$72.60
$548,328
108.
Assume the company's monthly target profit is $14,000. The unit sales to attain that target profit is
closest to:
A)
7,746
B)
2,556
C)
4,706
D)
3,815
109.
Assume the company's monthly target profit is $16,000. The dollar sales to attain that target profit is
closest to:
A)
$564,328
B)
$1,710,085
C)
$1,038,898
D)
$842,281
Use the following to answer questions 110-111:
Data concerning Strite Corporation's single product appear below:
Selling price per unit...........................
Variable expense per unit...................
Fixed expense per month...................
$150.00
$42.00
$421,200
110.
Assume the company's monthly target profit is $17,000. The unit sales to attain that target profit is
closest to:
A)
5,804
B)
2,921
C)
4,057
D)
10,433
111.
Assume the company's monthly target profit is $8,000. The dollar sales to attain that target profit is
closest to:
A)
$596,111
B)
$1,532,857
C)
$852,723
D)
$429,200
Use the following to answer questions 112-113:
Jerrel Corporation sells a product for $230 per unit. The product's current sales are 24,000 units and its break-even
sales are 17,280 units.
112.
What is the margin of safety in dollars?
ACTG-INT02.2020.B1
Page 18 of 19
A)
B)
C)
D)
$5,520,000
$1,545,600
$3,974,400
$3,680,000
113.
A)
B)
C)
D)
The margin of safety as a percentage of sales is closest to:
61%
28%
72%
39%
Use the following to answer questions 114-115
Maruska Corporation has provided the following data concerning its only product:
Selling price...........................
Current sales.........................
Break-even sales...................
114.
A)
B)
C)
D)
$180 per unit
29,800 units
25,032 units
What is the margin of safety in dollars?
$4,505,760
$858,240
$3,576,000
$5,364,000
115.
The margin of safety as a percentage of sales is closest to:
A)
19%
B)
16%
C)
84%
D)
81%
Use the following to answer questions 116-117:
Bois Corporation has provided its contribution format income statement for January.
Sales......................................
Variable expenses.................
Contribution margin................
Fixed expenses......................
Net operating income.............
$426,400
260,000
166,400
120,900
$ 45,500
116.
A)
B)
C)
D)
The degree of operating leverage is closest to:
0.11
9.37
0.27
3.66
117.
A)
B)
C)
D)
If the company's sales increase by 7%, its net operating income should increase by about:
26%
7%
66%
11%
Use the following to answer questions 118
The July contribution format income statement of Doxtater Corporation appears below:
Sales...................................................
Variable expenses..............................
Contribution margin............................
Fixed expenses...................................
Net operating income..........................
118.
A)
B)
C)
D)
$564,400
312,800
251,600
193,800
$ 57,800
The degree of operating leverage is closest to:
0.23
0.10
4.35
9.76
ACTG-INT02.2020.B1
Page 19 of 19
Use the following to answer questions 119-120:
Taylor, Inc. produces only two products, Acdom and Belnom. These account for 60% and 40% of the total sales dollars
of Taylor, respectively. The unit variable expense as a percentage of the selling price is 60% for Acdom and 85% for
Belnom. Total fixed expenses are $150,000. There are no other costs.
119.
A)
B)
C)
D)
What is Taylor's break-even point in sales dollars?
$150,000
$214,286
$300,000
$500,000
120.
Assuming that the total fixed expenses of Taylor increase by 30% and the sales mix remains constant,
what amount of sales dollars would be necessary to generate a net operating income of $9,000?
A)
$204,000
B)
$464,000
C)
$659,000
D)
$680,000
Use the following to answer questions 121-122:
Dietrick Corporation produces and sells two products. Data concerning those products for the most recent month
appear below:
Sales......................................
Variable expenses.................
Product B32L
$46,000
$13,800
Product K84B
$27,000
$14,670
Fixed expenses for the entire company were $42,550.
121.
A)
B)
C)
D)
The break-even point for the entire company is closest to:
$42,550
$71,020
$69,754
$30,450
122.
If the sales mix were to shift toward Product B32L with total sales remaining constant, the overall
break-even point for the entire company:
A)
could increase or decrease.
B)
would decrease.
C)
would not change.
D)
would increase.
Use the following to answer questions 123-124:
Ingrum Corporation produces and sells two products. In the most recent month, Product R38T had sales of $20,000
and variable expenses of $7,400. Product X08S had sales of $39,000 and variable expenses of $6,170. And the fixed
expenses of the entire company were $41,160.
123.
A)
B)
C)
D)
The break-even point for the entire company is closest to:
$41,160
$17,840
$53,455
$54,730
124.
If the sales mix were to shift toward Product R38T with total sales remaining constant, the overall
break-even point for the entire company:
A)
would not change.
B)
would increase.
C)
would decrease.
D)
could increase or decrease.
ACTG-INT02.2020.B1
Page 20 of 19