Question 1

Renfrew Corporation has provided the following data concerning its only product:  The margin of safety as a percentage of sales is closest to:

Accepted Answer

Margin of safety in dollars = Total actual sales - Break-even sales
= (22, 400 units × $110 per unit)- (15, 904 units × $110 per unit)
= $2, 464, 000 - $1, 749, 440 = $714, 560
Margin of safety percentage = Margin of safety in dollars ÷ Total actual sales
= $714, 560 ÷ $2, 464, 000 = 29%

Question 2

The following monthly data are available for the Wyatt Corporation and its only product:  The margin of safety for the company during May was:

Accepted Answer

Unit sales to break even = Fixed expenses ÷ Unit CM
= $50, 000 ÷ ($36 per unit - $28 per unit)= 6, 250 units
Margin of safety in dollars = Total budgeted (or actual)sales - Break-even sales
= ($36 per unit × 7, 000 units)- ($36 per unit × 6, 250 units)
= $252, 000 - $225, 000
= $27, 000

Question 3

Sanes Corporation produces and sells a single product.Data concerning that product appear below:  The unit sales to attain the company's monthly target profit of $19, 000 is closest to:

Accepted Answer

Unit CM = Selling price per unit - Variable expenses per unit
= $240.00 per unit - $88.80 per unit
= $151.20 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
= ($19, 000 + $498, 960)÷ $151.20 per unit
= $517, 960 ÷ $151.20 per unit
= 3, 426 units

Question 4

The Breiden Corporation sells rodaks for $6.00 per unit.Fixed expenses total $37, 500 per month and variable expenses are $2.00 per unit.The number of units that must be sold each month to realize a profit of 15% of sales is closest to:

Accepted Answer

Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
Q = [(0.15 × $6 per unit × Q)+ $37, 500] ÷ ($6 per unit - $2 per unit)
Q = [(0.15 × $6 per unit × Q)+ $37, 500] ÷ $4 per unit
$4.00 per unit × Q = ($0.90 per unit × Q)+ $37, 500
$3.10 per unit × Q = $37, 500
Q = $37, 500 ÷ $3.10 per unit = 12, 097 units

Question 5

Havely International Corporation's only product sells for $200.00 per unit and its variable expense is $70.00.The company's monthly fixed expense is $390, 000 per month.The unit sales to attain the company's monthly target profit of $10, 000 is closest to:

Accepted Answer

Unit CM = Selling price per unit - Variable expenses per unit
= $200.00 per unit - $70.00 per unit
= $130.00 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
= ($10, 000 + $390, 000)÷ $130.00 per unit
= $400, 000 ÷ $130.00 per unit
= 3, 077 units

Question 6

Data concerning Nazario Corporation's single product appear below:  The break-even in monthly unit sales is closest to:

Accepted Answer

Unit sales to break even = Fixed expenses ÷ Unit CM
= $188, 370 ÷ ($230.00 per unit - $85.10 per unit)
= $188, 370 ÷ $144.90 per unit
= 1, 300 units

Question 7

Data concerning Wang Corporation's single product appear below:  The break-even in monthly dollar sales is closest to:

Accepted Answer

CM ratio = Unit contribution margin ÷ Unit selling price
= ($150.00 per unit - $49.50 per unit)÷ $150.00 per unit
= $100.50 per unit ÷ $150.00 per unit = 0.67
Dollar sales to break even = Fixed expenses ÷ CM ratio
= $138, 690 ÷ 0.67
= $207, 000

Question 8

Frank Corporation 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:

Accepted Answer

Unit sales to break even = Fixed expenses ÷ Unit CM
5, 000 units = $45, 000 ÷ Unit CM
Unit CM = $45, 000 ÷ 5, 000 units = $9 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
= ($13, 500 + $45, 000)÷ $9 per unit
= $58, 500 ÷ $9 per unit
= 6, 500 units

Question 9

Palomo Corporation sells a product for $170 per unit.The product's current sales are 35, 200 units and its break-even sales are 25, 344 units.The margin of safety as a percentage of sales is closest to:

Accepted Answer

Margin of safety in dollars = Total sales - Break-even sales
= $170 per unit × 35, 200 units - $170 per unit × 25, 344 units
= $5, 984, 000 - $4, 308, 480 = $1, 675, 520
Margin of safety percentage = Margin of safety in dollars ÷ Total sales
= $1, 675, 520 ÷ $5, 984, 000 = 0.28

Question 10

Moonen Corporation produces and sells a single product whose contribution margin ratio is 57%.The company's monthly fixed expense is $487, 350 and the company's monthly target profit is $10, 000.The dollar sales to attain that target profit is closest to:

Accepted Answer

Dollar sales to attain a target profit = (Target profit + Fixed expenses)÷ CM ratio
= ($10, 000 + $487, 350)÷ 0.57
= $497, 350 ÷ 0.57
= $872, 544

Question 11

Blane Corporation produces and sells a single product.Data concerning that product appear below:  The break-even in monthly unit sales is closest to:

Accepted Answer

Unit CM = Selling price per unit - Variable expenses per unit
= $230.00 per unit - $73.60 per unit = $156.40 per unit
Unit sales to break even = Fixed expenses ÷ Unit CM
= $542, 708 ÷ $156.40 per unit = 3, 470 units

Question 12

Malley Corporation has provided the following data concerning its only product:  What is the margin of safety in dollars?

Accepted Answer

Margin of safety in dollars = Total sales - Break-even sales
= (13, 900 units × $150 per unit)- (10, 147 units × $150 per unit)
= $2, 085, 000 - $1, 522, 050 = $562, 950

Question 13

Data concerning Cutshall Enterprises Corporation's single product appear below:  The unit sales to attain the company's monthly target profit of $16, 000 is closest to:

Accepted Answer

Unit CM = Selling price per unit - Variable expenses per unit
= $190.00 per unit - $91.20 per unit
= $98.80 per unit
Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
= ($16, 000 + $424, 840)÷ $98.80 per unit
= $440, 840 ÷ $98.80 per unit
= 4, 462 units

Question 14

The contribution margin ratio of Baginski Corporation's only product is 53%.The company's monthly fixed expense is $617, 980 and the company's monthly target profit is $23, 000.The dollar sales to attain that target profit is closest to:

Accepted Answer

Dollar sales to attain a target profit = (Target profit + Fixed expenses)÷ CM ratio
= ($23, 000 + $617, 980)÷ 0.53
= $640, 980 ÷ 0.53
= $1, 209, 396

Question 15

Sales in North Corporation increased from $60, 000 per year to $63, 000 per year while net operating income increased from $10, 000 to $12, 000.Given this data, the company's degree of operating leverage must have been:

Accepted Answer

Percentage change in sales = ($63, 000/$60, 000)- 1.00 = 5%
Percentage change in net operating income = ($12, 000/$10, 000)- 1.00 = 20%
Percentage change in net operating income = Degree of operating leverage × Percentage change in sales
20% = Degree of operating leverage × 5%
Degree of operating leverage = 20% ÷ 5% = 4

Question 16

Morganti Corporation sells a product for $140 per unit.The product's current sales are 40, 700 units and its break-even sales are 31, 339 units. What is the margin of safety in dollars?

Accepted Answer

Margin of safety in dollars = Total sales - Break-even sales
= ($140 per unit × 40, 700 units)- ($140 per unit × 31, 339 units)
= $5, 698, 000 - $4, 387, 460 = $1, 310, 540

Question 17

Preyer Corporation produces and sells a single product.Data concerning that product appear below:  The break-even in monthly dollar sales is closest to:

Accepted Answer

CM ratio = Unit contribution margin ÷ Unit selling price
= ($230.00 per unit - $48.30 per unit)÷ $230.00 per unit
= $181.70 per unit ÷ $230.00 per unit = 0.79
Dollar sales to break even = Fixed expenses ÷ CM ratio
= $492, 407 ÷ 0.79
= $623, 300

Question 18

Wyly Inc.produces and sells a single product.The selling price of the product is $170.00 per unit and its variable cost is $62.90 per unit.The fixed expense is $356, 643 per month. The break-even in monthly dollar sales is closest to:

Accepted Answer

CM ratio = Unit contribution margin ÷ Unit selling price
= ($170.00 per unit - $62.90 per unit)÷ $170.00 per unit
= $107.10 per unit ÷ $170.00 per unit = 0.63
Dollar sales to break even = Fixed expenses ÷ CM ratio
= $356, 643 ÷ 0.63
= $566, 100

Question 19

Chibu Corporation is a single product firm with the following cost formula for all of its costs for next year, where X is the number of units sold and Y is total cost: Y = $225, 000 + $30X
Chibu sells its product for $120 per unit.What would Chibu's total sales dollars have to be next year in order to generate $270, 000 of net operating income?

Accepted Answer

CM ratio = Unit contribution margin ÷ Unit selling price
= ($120 per unit - $30 per unit)÷ $120 per unit = $90 per unit ÷ $120 per unit = 0.75
Dollar sales to attain a target profit = (Target profit + Fixed expenses)÷ CM ratio
= ($270, 000 + $225, 000)÷ 0.75 = $660, 000

Question 20

A product sells for $10 per unit and has variable expenses of $6 per unit.Fixed expenses total $45, 000 per month.How many units of the product must be sold each month to yield a monthly profit of $15, 000?

Accepted Answer

Unit sales to attain a target profit = (Target profit + Fixed expenses)÷ Unit CM
= ($15, 000 + $45, 000)÷ ($10 per unit - $6 per unit)
= $60, 000 ÷ $4 per unit
= 15, 000 units

Quiz 2: Cost-Volume-Profit Relationships

Renfrew Corporation has provided the following data concerning its only product: The margin of safety as a percentage of sales is closest to:

The following monthly data are available for the Wyatt Corporation and its only product: The margin of safety for the company during May was:

Sanes Corporation produces and sells a single product.Data concerning that product appear below: The unit sales to attain the company's monthly target profit of $19, 000 is closest to:

The Breiden Corporation sells rodaks for $6.00 per unit.Fixed expenses total $37, 500 per month and variable expenses are $2.00 per unit.The number of units that must be sold each month to realize a profit of 15% of sales is closest to:

Havely International Corporation's only product sells for $200.00 per unit and its variable expense is $70.00.The company's monthly fixed expense is $390, 000 per month.The unit sales to attain the company's monthly target profit of $10, 000 is closest to:

Data concerning Nazario Corporation's single product appear below: The break-even in monthly unit sales is closest to:

Data concerning Wang Corporation's single product appear below: The break-even in monthly dollar sales is closest to:

Frank Corporation 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:

Palomo Corporation sells a product for $170 per unit.The product's current sales are 35, 200 units and its break-even sales are 25, 344 units.The margin of safety as a percentage of sales is closest to:

Moonen Corporation produces and sells a single product whose contribution margin ratio is 57%.The company's monthly fixed expense is $487, 350 and the company's monthly target profit is $10, 000.The dollar sales to attain that target profit is closest to:

Blane Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly unit sales is closest to:

Malley Corporation has provided the following data concerning its only product: What is the margin of safety in dollars?

Data concerning Cutshall Enterprises Corporation's single product appear below: The unit sales to attain the company's monthly target profit of $16, 000 is closest to:

The contribution margin ratio of Baginski Corporation's only product is 53%.The company's monthly fixed expense is $617, 980 and the company's monthly target profit is $23, 000.The dollar sales to attain that target profit is closest to:

Sales in North Corporation increased from $60, 000 per year to $63, 000 per year while net operating income increased from $10, 000 to $12, 000.Given this data, the company's degree of operating leverage must have been:

Morganti Corporation sells a product for $140 per unit.The product's current sales are 40, 700 units and its break-even sales are 31, 339 units. What is the margin of safety in dollars?

Preyer Corporation produces and sells a single product.Data concerning that product appear below: The break-even in monthly dollar sales is closest to:

Wyly Inc.produces and sells a single product.The selling price of the product is $170.00 per unit and its variable cost is $62.90 per unit.The fixed expense is $356, 643 per month. The break-even in monthly dollar sales is closest to:

A product sells for $10 per unit and has variable expenses of $6 per unit.Fixed expenses total $45, 000 per month.How many units of the product must be sold each month to yield a monthly profit of $15, 000?