Question 1

Clockworks Co. reports the following data for the current year:
Units sold………………………………………… 1,200
Unit sales price…………………………………… $30
Unit variable cost………………………………… $10
Total fixed cost…………………………………… $18,000
Required:
(a) Calculate Clockworks' pretax income.
(b) Calculate Clockworks' degree of operating leverage.

Accepted Answer

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Question 2

Seaquest Company's contribution margin income statement is presented below. Sales for the current period consisted of 5,000 units. Determine the company's break-even point in dollars.

Accepted Answer

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Question 3

A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

Accepted Answer

The answer of A company manufactures and sells searchlights. Each...

Question 4

Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs, $24,000; direct labor costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

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Question 5

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

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Question 6

Wolowitz Company's product has a contribution margin per unit of $62.50 and a contribution margin ratio of 25%. What is the per unit selling price of the product?

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Question 7

Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%?Prepare contribution margin income statements and compute the degree of operating leverage

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The answer of Craft Company and Jarmer Company each have...

Question 8

The following information describes a product expected to be produced and sold by Quark Corporation:
Selling price…………………………… $33 per unit
Variable costs………………………… $27 per unit
Total fixed costs……………………… $855,000 per year
Required:
(a) Calculate the contribution margin per unit.
(b) Calculate the break-even point in units.

Accepted Answer

The answer of The following information describes a product expected...

Question 9

A company manufactures a product and sells it for $120 per unit. The total fixed costs of manufacturing and selling the product are expected to be $155,250, and the variable costs are expected to be $75 per unit. What is the company's break-even point in (a) units and (b) dollar sales?

Accepted Answer

The answer of A company manufactures a product and sells...

Question 10

A company is looking into two alternative methods of producing its product. The following information about the two alternatives is available. If the company's expected sales volume is 35,000 units, which alternative should be selected?Prepare forecasted contribution margin income statements and compute the degree of operating leverage to assess the alternatives.

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Question 11

A company sells a single product that has a contribution margin ratio of 28%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

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Question 12

Expanse Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $50; and total fixed costs of $150,000. Calculate the break-even point in units and in dollar sales.

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Question 13

A company has total fixed costs of $360,000. Its product sells for $40 per unit and variable costs amount to $25 per unit. What is the break-even point in dollar sales?

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Question 14

The following information is available for a company's cost of sales over the last four months.
  Use the high-low method to estimate the fixed and variable components of the cost of sales.

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Question 15

Dodge Industries incurs the following costs during the current year:
  Sales for the year were $80,000 and Dodge determined that only the direct production costs and factory supplies are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Dodge
Industries.
(b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Accepted Answer

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Question 16

Elk Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Elk can buy a newer production machine that will increase total fixed costs by $22,800 and decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Elk's break-even point in units?

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The answer of Elk Co. manufactures a product that sells...

Question 17

Fielder Productions reports the following information:
Total contribution margin………………… $32,000
Total fixed costs…………………………… $28,000
Required:
(a) Calculate Fielder's degree of operating leverage (DOL).
(b) If sales increase by 6%, what is the expected percentage increase in pretax income?

Accepted Answer

The answer of Fielder Productions reports the following information:
Total contribution...

Question 18

Isaacson Co. has total fixed costs of $240,000 and a contribution margin ratio of 40%. If rent expense increases by $5,000, how much will total sales revenue have to increase to cover this increase in costs?

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The answer of Isaacson Co. has total fixed costs of...

Question 19

Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $17,000; depreciation on factory equipment, $21,000; direct labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?

Accepted Answer

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Question 20

Bing Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent.

Accepted Answer

The answer of Bing Company's contribution margin income statement is...

Quiz 5: Cost Behavior and Cost-Volume-Profit Analysis