Exam 6: Variable Costing and Segment Reporting: Tools for Management

Data concerning Marchman Corporation's single product appear below: The company is currently selling 4,000 units per month. Fixed expenses are $166,000 per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Marchman 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 $11,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 800 units. What should be the overall effect on the company's monthly net operating income of this change?

The July contribution format income statement of Raiche Corporation appears below: The degree of operating leverage is closest to:

Data concerning Kurek Corporation's single product appear below: Fixed expenses are $190,000 per month. The company is currently selling 4,000 units per month. Required: The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $11,100 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,500 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative to its previous position will:

If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease.

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:

All other things the same, an increase in variable expense per unit will reduce the break-even point.

The management of Pacubas Corporation expects sales in July to be $121,000. The company's contribution margin ratio is 64% and its fixed monthly expenses are $40,000. Required: Estimate the company's net operating income for July, assuming that the fixed monthly expenses do not change. Show your work!

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:

Froio Corporation produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $26,570. If the sales mix were to shift toward Product M06M with total sales remaining constant, the overall break-even point for the entire company:

The margin of safety is:

Bohlen Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $716,000 per month. The company is currently selling 6,000 units per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Bohlen 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 $8. 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?

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

Hargenrader Inc. produces and sells two products. During the most recent month, Product P02S's sales were $24,000 and its variable expenses were $7,920. Product O50U's sales were $41,000 and its variable expenses were $14,180. The company's fixed expenses were $40,350. Required: a. Determine the overall break-even point for the company in total sales dollars. Show your work! b. If the sales mix shifts toward Product P02S with no change in total sales, what will happen to the break-even point for the company? Explain.

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

Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. If the company sells 5,400 units, its net operating income should be closest to:

Which of the following is NOT a correct definition of the break-even point?

Comings Corporation produces and sells two products. In the most recent month, Product R19J had sales of $30,000 and variable expenses of $9,000. Product O37G had sales of $34,000 and variable expenses of $10,840. The fixed expenses of the entire company were $35,560. If the sales mix were to shift toward Product R19J with total dollar sales remaining constant, the overall break-even point for the entire company:

In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be higher in the company with a higher proportion of fixed expenses in its cost structure.

Hartung Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $147,000 per month. The company is currently selling 2,000 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 $13 per unit. In exchange, the sales staff would accept a decrease in their salaries of $22,000 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 400 units. What should be the overall effect on the company's monthly net operating income of this change?