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Exam 5: Cost-Volume-Profit Relationships

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Question 201

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Stonebraker Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range. Required: a. If sales increase to 9,040 units, what would be the estimated increase in net operating income? b. If the variable cost per unit increases by $6, spending on advertising increases by $3,000, and unit sales increase by 19,200 units, what would be the estimated net operating income? c. Estimate how many units must be sold to achieve a target profit of $26,100.

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a. The increase in net operating income ...

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Question 202

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Decaprio Incorporated produces and sells a single product. The company has provided its contribution format income statement for June. 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

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

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Question 203

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Houpe Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. 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?

In a scattergraph of cost and activity, activity is the independent variable because it causes variations in the cost.

Lydic Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. The degree of operating leverage is closest to:

An increase in the number of units sold will decrease a company's break-even point.

Iacob Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $136.00 per unit. The best estimate of the total contribution margin when 11,020 units are sold is:

Chovanec Corporation produces and sells a single product. Data concerning that product appear below: 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?

Product Y sells for $15 per unit, and has variable expenses of $9 per unit. Fixed expenses total $300,000 per year. How many units of Product Y must be sold each year to yield an annual profit of $90,000?

Data concerning Sinisi Corporation's single product appear below: The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

Data concerning Wislocki Corporation's single product appear below: Fixed expenses are $1,033,000 per month. The company is currently selling 9,600 units per month.Required: The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $13 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $113,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 420 units. What should be the overall effect on the company's monthly net operating income of this change?

The following information pertains to Nova Co.'s cost-volume-profit relationships: How much will be contributed to net operating income by the 1,001st unit sold?

Ferkil Corporation manufacturers a single product that has a selling price of $25.00 per unit. Fixed expenses total $65,000 per year, and the company must sell 6,500 units to break even. If the company has a target profit of $15,000, sales in units must be:

Singapore Candy Cane Corporation is a single product firm with the following cost structure for next year: What is the company's break-even point next year in sales dollars? (Round your intermediate calculations to 2 decimal places.)

Utility costs at one of Hannemann Corporation's factories are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours. Required: Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.

Lister Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. If sales decline to 2,900 units, the net operating income would be closest to: (Round your intermediate calculations to 2 decimal places.)