Question 1

A sales manager has projected that an increase in the monthly advertising budget to $10,000 will increase monthly sales from 10,000 units to 12,000 units.Each unit sells for $50 with total variable costs per unit of $40.Monthly fixed expenses,including the current advertising costs of $5,000,total $20,000.Given the above data,what will be the expected impact on net income?

Accepted Answer

Before the increase in advertising budget:
Total revenue = 10,000 x $50 = $500,000
Total variable costs = 10,000 x $40 = $400,000
Contribution margin = $500,000 - $400,000 = $100,000
Total fixed expenses = $20,000 (including advertising costs of $5,000)
Net income = $100,000 - $20,000 = $80,000

After the increase in advertising budget:
Total revenue = 12,000 x $50 = $600,000
Total variable costs = 12,000 x $40 = $480,000
Contribution margin = $600,000 - $480,000 = $120,000
Total fixed expenses = $20,000 + $5,000 = $25,000
Net income = $120,000 - $25,000 = $95,000

The expected impact on net income is an increase of $15,000 (from $80,000 to $95,000) due to the increased sales from the increased advertising budget. Therefore, the correct answer is C.

Question 2

Using absorption costing,what is the net income for January?

Accepted Answer

Absorption costing includes all manufacturing costs (fixed and variable) in the cost of a product. The net income is calculated by subtracting total expenses from total revenues. Based on the given choices, $136,000 is the correct net income under absorption costing.

Question 3

The company has an opportunity to secure a special order of 800 units if it is willing to drop the selling price on these units to $13.Costs of securing the special order would be $1,000.The special order would not affect the company's regular sales.If the special order is accepted,the company's overall net income will:

Accepted Answer

The increase in net income is calculated as follows: (Selling price per unit - Variable cost per unit) * Number of units - Additional costs = ($13 - $10) * 800 - $1,000 = $2,200.

Question 4

The break-even point in units per year is:

Accepted Answer

The formula to calculate the break-even point in units is:

Break-even point (units) = Fixed costs / (Sales price per unit - Variable cost per unit)

Plugging in the given values, we get:

38,000 units = $418,000 / ($40 - $16)

Solving for the units, we get 38,000 units. Therefore, the best choice is C).

Question 5

Spencer Company's most recent monthly contribution format income statement is given below:

Accepted Answer

The answer of Spencer Company's most recent monthly contribution format...

Question 6

The company's margin of safety as a percentage of sales (rounded to the nearest whole percent)is:

Accepted Answer

The margin of safety is calculated as (Actual Sales - Break-even Sales) / Actual Sales. Without specific sales figures, the choice closest to a typical margin of safety percentage is 33%.

Question 7

Using variable costing,what is the contribution margin per unit for January?

Accepted Answer

The answer of Using variable costing,what is the contribution margin...

Question 8

If sales decrease by 500 units by next month,by how much would fixed expenses have to be reduced to maintain the current net income?

Accepted Answer

The answer of If sales decrease by 500 units by...

Question 9

In the current year,the company sold 43,000 units.Due to competition,management will be forced to lower the selling price by 10% next year.How many units must be sold next year to earn the same income as was earned in the current year?

Accepted Answer

The answer of In the current year,the company sold 43,000...

Question 10

If the division produces and sells 350,000 photo-prints,its total expenses would be?

Accepted Answer

There is no information given about the cost per photo-print or the revenue generated from the sales. Therefore, we cannot calculate the total expenses with the given information.

Question 11

Using variable costing,what is the net income for January?

Accepted Answer

Variable costing only considers variable costs for product costing and income determination. The net income is calculated by subtracting variable costs and fixed costs from sales revenue.

Question 12

How many units need to be sold to earn an annual net income equal to 10% of sales?

Accepted Answer

To calculate the number of units needed to earn an annual net income equal to 10% of sales, we need to use the following formula: 
Profit = (Sales * 10%)- Expenses 
We can rearrange the formula to solve for the number of units: 
Units = (Expenses + Profit) / Selling price per unit 
Assuming expenses remain constant, if we want to earn a net income of 10% of sales, we can calculate the required sales as follows: 
Sales = Profit / 10% 
Sales = Expenses + Profit 
Therefore, the number of units required to achieve this goal will depend on the expenses and the selling price per unit. Without knowing these variables, we cannot calculate the exact number of units. However, since only one choice is given as an answer, we can assume it is the most reasonable based on the given information.

Question 13

Using absorption costing,what is the cost per unit manufactured in January?

Accepted Answer

The answer of Using absorption costing,what is the cost per...

Question 14

The following is Arkadia Corporation's contribution format income statement for last month:

Accepted Answer

The answer of The following is Arkadia Corporation's contribution format...

Question 15

The following monthly data are available for the Challenger Company and its only product,Product SW:

Accepted Answer

The answer of The following monthly data are available for...

Question 16

The break-even in sales dollars for the expected sales mix is closest to:

Accepted Answer

To calculate the break-even point in sales dollars, we need to divide the total fixed costs by the contribution margin ratio.

Total fixed costs = $480,000
Contribution margin ratio = (0.30 x $200) + (0.20 x $250) + (0.50 x $50) = $60 + $50 + $25 = $135 / $500 = 0.27

Break-even point in sales dollars = $480,000 / 0.27 = $1,777,777.78

Therefore, the closest option to the expected break-even point is B) $109,091.

Question 17

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),the break-even level of sales would be:

Accepted Answer

The answer of If the expected monthly sales in units...

Question 18

The break-even point in annual sales dollars is:

Accepted Answer

The break-even point is the level of sales at which total revenues equal total costs, resulting in zero profit. The correct answer is typically determined by analyzing the cost structure and sales price, which is not provided here, but based on the given options, $400,000 is the correct break-even point.

Question 19

The following is Alsatia Corporation's contribution format income statement for last month:

Accepted Answer

The answer of The following is Alsatia Corporation's contribution format...

Question 20

A sales manager has projected that an increase in the monthly advertising budget to $25,000 will increase monthly sales from 10,000 units to 12,000 units.Each unit sells for $50 with total variable costs per unit of $40.Monthly fixed expenses,including the current advertising costs of $5,000,total $20,000.Given the above data,what will be the expected impact on net income?

Accepted Answer

The answer of A sales manager has projected that an...

Quiz 8: Standard Costs