Deck 18: Cost-Volume-Profit Analysis

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Question
The total manufacturing cost per unit increases as total production volume increases.
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Question
Fixed costs per unit decrease as production levels decrease.
Question
A method used to separate mixed costs into fixed and variable components is called the high-low method.
Question
Which of the following is not a fixed cost?

A) Property taxes
B) Salary of plant manager
C) Indirect materials
D) Straight-line depreciation
Question
Which of the following statements is not correct?

A) The total fixed cost is constant throughout the relevant range of activity.
B) The breakeven point increases if variable costs increase.
C) The margin of safety increases if fixed costs decrease.
D) The mixed cost per unit is constant throughout the relevant range of activity.
Question
Which of the following statements describes variable costs?

A) They are fixed in total throughout the relevant range of activity.
B) They decrease on a per unit basis as production volume increases.
C) They vary on a per unit basis but do not vary in total as production changes.
D) They are constant on a per unit basis but vary in total as production changes.
Question
An electric bill for corporate headquarters is an example of what type of cost?

A) Variable cost
B) Conversion cost
C) Fixed cost
D) Mixed cost
Question
Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs. What was the variable cost per dog wash associated with Jenny's water bill?

A) $.67
B) $1.00
C) $0.50
D) $2.00
Question
Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs. What was the fixed cost associated with Jenny's water bill?

A) $1,500
B) $3,000
C) $1,000
D) $2,000
Question
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the contribution margin ratio?

A) 0.70
B) 0.44
C) 0.56
D) 0.30
Question
Marino Company's average manufacturing cost was $5.40 when 50,000 units were manufactured and was
$5)25 when 80,000 units were manufactured. How much was Marino's variable cost per unit?

A) $5.25
B) $5.00
C) $5.40
D) $5.32
Question
If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.
Question
When additional units are sold, the change in operating income is equal to the change in contribution margin.
Question
Both the income statement approach and the contribution margin approach may be used for CVP analysis.
Question
If fixed expenses increase, both the breakeven point and the margin of safety increase.
Question
The Black Corporation and the Blue Company both have a contribution margin ratio of 35%; therefore a $100,000 increase in sales will result in an equal increase in operating income for both companies.
Question
Which of the following is a characteristic of a contribution margin income statement?

A) Variable and fixed expenses are combined into total expenses.
B) When variable costs are less than sales revenue, there is a positive contribution margin.
C) The amount of gross margin is shown.
D) Contribution margin is identified as the difference between sales revenue and total expenses.
Question
Which of the following statements is correct?

A) The contribution margin income statement can be used for external reporting purposes.
B) The contribution margin income statement is relevant for managing a business operation.
C) If a company has a positive contribution margin, its operating income will also be positive.
D) The contribution margin equals gross profit for most all firms.
Question
Pennell Company gathered the following information for the year ended December 31, 2009:
 Fixed costs:  Manufacturing $165,000 Marketing $52,000 Administrative $24,000 Variable costs:  Manufacturing $113,000 Marketing $39,000 Administrative $48,000\begin{array}{|cr|}\hline {\text { Fixed costs: }} \\\hline \text { Manufacturing } & \$ 165,000 \\\hline \text { Marketing } & \$ 52,000 \\\hline \text { Administrative } & \$ 24,000 \\\hline \text { Variable costs: } \\\hline \text { Manufacturing } & \$ 113,000 \\\hline \text { Marketing } & \$ 39,000 \\\hline \text { Administrative } & \$ 48,000 \\\hline\end{array} During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.50 per unit. What is the contribution margin?

A) $209,500
B) $287,500
C) $122,500
D) $246,500
Question
Pennell Company gathered the following information for the year ended December 31, 2009:
 Fixed costs:  Manufacturing $165,000 Marketing $52,000 Administrative $24,000 Variable costs:  Manufacturing $113,000 Marketing $39,000 Administrative $48,000\begin{array}{|cr|}\hline {\text { Fixed costs: }} \\\hline \text { Manufacturing } & \$ 165,000 \\\hline \text { Marketing } & \$ 52,000 \\\hline \text { Administrative } & \$ 24,000 \\\hline \text { Variable costs: } \\\hline \text { Manufacturing } & \$ 113,000 \\\hline \text { Marketing } & \$ 39,000 \\\hline \text { Administrative } & \$ 48,000 \\\hline\end{array} During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.50 per unit. What is the operating income (loss)?

A) $46,500
B) $118,500
C) ($28,500)
D) $94,500
Question
Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. How many dog treats must Canine Company sell to breakeven?

A) 330
B) 471
C) 1,100
D) 194
Question
Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. What is the breakeven point in sales dollars?

A) $11,000
B) $4,714
C) $3,300
D) $7,700
Question
Fixed Company produces a single product selling for $30 per unit. Variable costs are $12 per unit and total fixed costs are $4,000. What is the contribution margin ratio?

A) 1.67
B) 2.50
C) 0.40
D) 0.60
Question
If the sales price per unit is $7, the unit contribution margin is $3, and total fixed expenses are $19,500, what is the breakeven point in units?

A) 2,786
B) 6,500
C) 5,850
D) 4,875
Question
If the sale price per unit is $24.50, the variable expense per unit is $17, and total fixed expenses are $324,000, what is the breakeven point in sales dollars?

A) $734,400
B) $466,946
C) $1,058,400
D) $224,808
Question
Assuming 10,000 units are sold, what is the contribution margin?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $230,000
B) $65,000
C) $150,000
D) $80,000
Question
If sales revenue per unit increases to $25 and 10,000 units are sold, what is the contribution margin?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $150,000
B) $100,000
C) $1,250,000
D) $135,000
Question
If sales revenue per unit decreases to $18 and 15,000 units are sold, what is the operating income?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $270,000
B) $30,000
C) $50,000
D) $45,000
Question
Which of the following statements is not correct?

A) The breakeven point increases and the margin of safety decreases when the contribution margin ratio decreases.
B) The breakeven point decreases and the margin of safety increases when fixed costs decrease.
C) The breakeven point increases and the margin of safety decreases when fixed costs increase.
D) The breakeven point decreases and the margin of safety increases when the variable cost per unit increases.
Question
The Pearson Company has a contribution margin ratio of 25%. Pearson's operating income was $100,000 when sales totaled $1,000,000. What were Pearson's fixed expenses?

A) $250,000
B) $150,000
C) $350,000
D) $225,000
Question
If the sales price per unit is $8.50, the variable expenses per unit is $6.75, and the breakeven point in sales dollars is $331,500, what are total fixed expenses?

A) $22,286
B) $68,250
C) $39,000
D) $26,325
Question
If the sales price per unit is $32, total fixed expenses are $45,000 and the breakeven sales in dollars is $180,000, what is the variable expense per unit?

A) $8.00
B) $4.20
C) $4.00
D) $24.00
Question
If the sales price per unit is $35, the unit contribution margin is $7.50, and total fixed expenses are $56,000, what is the breakeven point in units?

A) 1,600
B) 7,467
C) 2,036
D) 3,733
Question
If the sales price per unit is $68.50, the variable expense per unit is $45, and total fixed expenses are $1,325,400, what is the breakeven point in units?

A) 56,000
B) 56,400
C) 29,453
D) 19,349
Question
If the sales price per unit is $89, total fixed expenses are $456,000, and the breakeven sales in dollars is $760,000, what is the variable expense per unit?

A) $17.80
B) $35.60
C) $44.50
D) $3.42
Question
If the sale price per unit is $21.50, the variable expense per unit is $16.75, and the breakeven point in sales is $634,250, what are total fixed expenses?

A) $494,125
B) $29,500
C) $140,125
D) $179,864
Question
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the current sales price?

A) 8,571 units
B) 20,000 units
C) 6,667 units
D) 10,650 units
Question
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the anticipated sales price next year?

A) 16,667 units
B) 6,667 units
C) 8,571 units
D) 7,143 units
Question
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. If fixed costs were to increase 10% next year, and the new sales price goes into effect, what is the breakeven point in units?

A) 9,429 units
B) 22,000 units
C) 7,333 units
D) 7,857 units
Question
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. If fixed costs were to decrease 10% during the current year, contribution margin would do what?

A) Increase 10%
B) Remain the same
C) Impossible to determine with the given data
D) Decrease 10%
Question
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the contribution margin per unit?

A) $1.05
B) $7.00
C) $4.55
D) $2.45
Question
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the breakeven point in units?

A) 85,714
B) 37,235
C) 36,735
D) 25,714
Question
Given breakeven sales in units of 22,000 and a unit contribution margin of $2.40, how many units must be sold to reach a target operating income of $4,524?

A) 4,863
B) 11,671
C) 23,885
D) 1,885
Question
The Prentice Company has provided the following information:
 Net sales $1,000,000 Operating income $100,000 Contribution margin ratio 25%\begin{array} { | l | r | } \hline \text { Net sales } & \$ 1,000,000 \\\hline \text { Operating income } & \$ 100,000 \\\hline \text { Contribution margin ratio } & 25 \% \\\hline\end{array} What is the breakeven point in sales dollars?

A) $250,000
B) $400,000
C) $600,000
D) $900,000
Question
The Pearson Corporation has provided the following information pertaining to its most recent year of
 Sales $250,000 Contribution margin ratio 40% Operating income $50,000\begin{array} { | l | r | } \hline \text { Sales } & \$ 250,000 \\\hline \text { Contribution margin ratio } & 40 \% \\\hline \text { Operating income } & \$ 50,000 \\\hline\end{array} What was the breakeven point in sales dollars?

A) $125,000
B) $100,000
C) $200,000
D) $500,000
Question
Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a decrease in the contribution margin per unit?

A) An increase in the selling price per unit.
B) A decrease in fixed costs.
C) A decrease in the hourly wage paid to direct laborers.
D) An increase in the unit cost of direct materials.
Question
The Red Wing Company reported sales of $750,000, a contribution margin ratio of 25%, a variable costof $150 per unit, and fixed costs totaling $125,000. What was the margin of safety in units?

A) 3,750
B) 1,250
C) 2,500
D) 1,000
Question
The Hawk Company reported sales of $960,000, a contribution margin ratio of 30%, a variable costof $210 per unit, and fixed costs totaling $270,000. What was the breakeven point in units?

A) 3,000
B) 386
C) 1,286
D) 1,372
Question
Which of the following would explain why the margin of safety in dollars increased even though totalsales dollars did not change?

A) The breakeven point increased
B) Fixed costs increased
C) The variable cost per unit increased
D) The sales price per unit increased
Question
On a CVP graph, the vertical distance between the total expense line and the total sales revenue line equals the operating income or loss.
Question
On a CVP graph, the increase in the operating income as the sales volume increases is equal to the additional contribution margin that is created by the sale of additional units.
Question
To find the number of units that must be sold to achieve a desired operating income, total fixed expenses plus the desired operating income are divided by the contribution margin ratio.
Question
The increase in the unit breakeven point caused by an increase in fixed costs of $50,000 is equal to the additional number of units that need to be sold in order to increase contribution margin by $50,000.
Question
On a CVP graph, what does the horizontal line intersecting the dollar axis at the level of total cost represent?

A) Total fixed costs
B) Breakeven point
C) Total variable costs
D) Total costs
Question
In a CVP graph, what does the line which begins at the lower left corner represent?

A) Total sales revenue
B) Total variable cost
C) Total fixed cost
D) Both the total variable cost and the total sales revenue
Question
On a CVP graph, the intersection of the sales line and the total cost line is known as the:

A) total cost point.
B) breakeven point.
C) unit contribution margin.
D) margin of safety point.
Question
margin of safety is $500,000 when actual sales are $1,200,000 and the breakeven point in sales is $700,000.
Question
Fairfield Company management has budgeted the following amounts for its next fiscal year:
 Total fixed expenses $832,500 Sale price per unit $40 Variable expenses per unit $25\begin{array} { | l | r | } \hline \text { Total fixed expenses } & \$ 832,500 \\\hline \text { Sale price per unit } & \$ 40 \\\hline \text { Variable expenses per unit } & \$ 25 \\\hline\end{array} If Fairfield Company can reduce fixed expenses by $41,625, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven point in units?

A) $0.75
B) $0.53
C) $0.25
D) $2.78
Question
Fairfield Company management has budgeted the following amounts for its next fiscal year:
 Total fixed expenses $832,500 Sale price per unit $40 Variable expenses per unit $25\begin{array} { | l | r | } \hline \text { Total fixed expenses } & \$ 832,500 \\\hline \text { Sale price per unit } & \$ 40 \\\hline \text { Variable expenses per unit } & \$ 25 \\\hline\end{array} If fixed expenses increase by 10%, to maintain the original breakeven sales in units, the sale price per unit would have to be:

A) decreased by 10%.
B) increased by 3.75%.
C) increased by 3.61%.
D) decreased by 5.55%.
Question
Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. Total fixed costs are $25,000. What will be the effect on the breakeven point if variable costs increase by 10% due to an increase in the cost of direct materials?

A) It will increase by 136 units.
B) It will increase by 242 units.
C) It will decrease by 136 units.
D) It will decrease by 242 units.
Question
If total fixed costs are $95,000, contribution margin per unit is $8.00, and targeted operating income is $30,000, how many units must be sold to breakeven?

A) 11,875
B) 8,125
C) 5,625
D) 3,750
Question
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} How many units must be sold to earn the targeted operating income?

A) 37,143
B) 123,810
C) 53,061
D) 36,735
Question
Given breakeven sales in units of 45,700 and a unit contribution margin of $6, how many units must be sold to reach a target operating income of $25,200?

A) 45,700
B) 49,900
C) 1,813
D) 4,200
Question
If the sales price per unit is $75, variable expenses per unit are $40, target operating income is $22,000, and total fixed expenses are $16,500, how many units must be sold to reach the target operating income?

A) 963
B) 1,100
C) 629
D) 513
Question
If the contribution margin ratio is 26%, target operating income is $32,000, and target sales are $200,000, what are total fixed expenses?

A) $52,000
B) $23,077
C) $20,000
D) $8,320
Question
If target sales in units are 62,300, total fixed expenses are $7,800, and the unit contribution margin is $.15, what is the target operating income?

A) $3,000
B) $1,545
C) $8,175
D) $9,345
Question
Leggins Company sells two products, X and Y. Product X sells for $20 per unit with variable costs of $15. Product Y sells for $24 with variable costs of $20. Total fixed costs for the company are $38,000. Leggins Company typically sells three units of Product X for every unit of Product Y. What is the breakeven point in total units?

A) 2,000 units
B) 6,333 units
C) 6,000 units
D) 8,000 units
Question
Which of the following changes would normally increase the contribution margin per unit the most?

A) A 20% decrease in fixed costs.
B) A 25% increase in the variable cost per unit.
C) A 25% increase in the sales price per unit.
D) A 25% decrease in the variable cost per unit?
Question
The Prentice Corporation has provided the following information pertaining to its most recent year of
 Margin of safety $250,000 Contribution margin ratio 40% Fixed costs $50,000\begin{array} { | l | r | } \hline \text { Margin of safety } & \$ 250,000 \\\hline \text { Contribution margin ratio } & 40 \% \\\hline \text { Fixed costs } & \$ 50,000 \\\hline\end{array} How much were Prentice's total sales during the most recent year?

A) $625,000
B) $375,000
C) $500,000
D) $750,000
Question
The McPherson Company is facing an increase in the variable cost of producing and selling one of its products for the upcoming year. As a result, the sales manager has made a proposal to increase the selling price of the product while increasing the advertising budget at the same time. McPherson has provided the following information regarding the current year results and the proposal made by the sales manager:
 Current Year  Proposal  Unit sales 27,00018,000 Sales price per unit $48$58 Variable cost per unit $30$36 Fixed costs $76,000$96,000\begin{array} { | l | r | r | } \hline & \text { Current Year } & { \text { Proposal } } \\\hline \text { Unit sales } & 27,000 & 18,000 \\\hline \text { Sales price per unit } & \$ 48 & \$ 58 \\\hline \text { Variable cost per unit } & \$ 30 & \$ 36 \\\hline \text { Fixed costs } & \$ 76,000 & \$ 96,000 \\\hline\end{array} Relative to the current year, the sales manager's proposal will:

A) decrease operating income by $90,000.
B) increase contribution margin by $90,000.
C) decrease the unit breakeven point.
D) decrease operating income by $110,000.
Question
Hunter Manufacturing has provided the following information:
 Breakeven point in units 12,500 Variable cost per unit $437.50 Fixed costs $4,062,500 Operating income $1,000,000\begin{array} { | l | l | } \hline \text { Breakeven point in units } & 12,500 \\\hline \text { Variable cost per unit } & \$ 437.50 \\\hline \text { Fixed costs } & \$ 4,062,500 \\\hline \text { Operating income } & \$ 1,000,000 \\\hline\end{array} What is the sales price per unit?

A) $762.50
B) $325.00
C) $517.50
D) $405.00
Question
Lisa Manufacturing has provided the following information:
 Breakeven point in units 25,000 Variable cost per unit $875.00 Fixed costs $8,125,000 Operating income $1,625,000\begin{array} { | l | r | } \hline \text { Breakeven point in units } & 25,000 \\\hline \text { Variable cost per unit } & \$ 875.00 \\\hline \text { Fixed costs } & \$ 8,125,000 \\\hline \text { Operating income } & \$ 1,625,000 \\\hline\end{array} What is the margin of safety in units?

A) 5,000
B) 30,000
C) 35,000
D) 1,857
Question
The following information has been provided by Knauer Corporation:
 Operating income $320,000 Variable cost per unit $220 Fixed costs $800,000 Units sold 16,000\begin{array} { | l | r | } \hline \text { Operating income } & \$ 320,000 \\\hline \text { Variable cost per unit } & \$ 220 \\\hline \text { Fixed costs } & \$ 800,000 \\\hline \text { Units sold } & 16,000 \\\hline\end{array} Which of the following statements is correct?

A) The unit breakeven point can't be determined given the information provided.
B) The sales price per unit was $290.00.
C) The margin of safety can't be determined given the information provided.
D) The contribution margin per unit was $50.00.
Question
Moylan Company has provided the following contribution margin income statement:
 Sales $777,000 Variable expenses $504,000 Contribution margin $273,000 Fixed expenses $212,000 Operating income $61,000\begin{array} { | l | l | } \hline \text { Sales } & \$ 777,000 \\\hline \text { Variable expenses } & \$ 504,000 \\\hline \text { Contribution margin } & \$ 273,000 \\\hline \text { Fixed expenses } & \$ 212,000 \\\hline \text { Operating income } & \$ 61,000 \\\hline\end{array} If the sales volume increases 20%, which of the following statements is correct?

A) The breakeven point will increase 20%.
B) The margin of safety will increase 20%
C) Operating income will increase by more than 20%.
D) Fixed costs will increase 20%.
Question
Bolognese Company's contribution margin income statement for January is as follows:
 Sales (7,770 units) $388,500 Variable expenses 233,100 Contribution margin $155,400 Fixed expenses 65,000 Operating income $90,400\begin{array} { | l | r | } \hline \text { Sales } ( 7,770 \text { units) } & \$ 388,500 \\\hline \text { Variable expenses } & 233,100 \\\hline \text { Contribution margin } & \$ 155,400 \\\hline \text { Fixed expenses } & 65,000 \\\hline \text { Operating income } & \$ 90,400 \\\hline\end{array} If Bolognese were to sell 8,200 units during February, how much would operating income be?

A) $99,000
B) $111,900
C) $96,300
D) $107,300
Question
Bolognese Company's contribution margin income statement for January is as follows:
 Sales (7,770 units) $388,500 Variable expenses 233,100 Contribution margin $155,400 Fixed expenses 65,000 Operating income $90,400\begin{array} { | l | r | } \hline \text { Sales } ( 7,770 \text { units) } & \$ 388,500 \\\hline \text { Variable expenses } & 233,100 \\\hline \text { Contribution margin } & \$ 155,400 \\\hline \text { Fixed expenses } & 65,000 \\\hline \text { Operating income } & \$ 90,400 \\\hline\end{array} Which of the following statements is not correct?

A) The breakeven point in units was 3,250 for the month of January.
B) The margin of safety was $226,000 for the month of January.
C) The contribution margin ratio was 40% for the month of January.
D) A 10% increase in sales would have resulted in a 10% increase in operating income during January.
Question
During the most recent year, RDJ Company reported sales of $1,200,000, variable expenses of $720,000, and a margin of safety of $450,000. How much were RDJ's fixed expenses?

A) $30,000
B) $18,000
C) $48,000
D) $27,000
Question
Claire Corporation's contribution margin income statement for March is as follows:
 Sales (2,500 units) $112,500 Variable expenses 78,750 Contribution margin $33,750 Fixed expenses 15,000 Operating income $18,750\begin{array} { | l | r | } \hline \text { Sales (2,500 units) } & \$ 112,500 \\\hline \text { Variable expenses } & 78,750 \\\hline \text { Contribution margin } & \$ 33,750 \\\hline \text { Fixed expenses } & 15,000 \\\hline \text { Operating income } & \$ 18,750 \\\hline\end{array} Claire's manager has proposed that the unit selling price be increased by 10% for the month of April. The manager believes that the selling price increase will result in a 250 unit decrease in sales during April. Should the manager's proposal be accepted?

A) Yes, because operating income will increase $6,750.
B) No, because contribution margin will decrease $3,375.
C) No, because operating income will decrease $1,875.
D) Yes, because contribution margin will increase $10,125.
Question
Hill Corporation's contribution margin income statement for March is as follows:
 Sales (3,500 units) $210,000 Variable expenses 115,500 Contribution margin $94,500 Fixed expenses 59,400 Operating income $35,100\begin{array} { | l | r | } \hline \text { Sales (3,500 units) } & \$ 210,000 \\\hline \text { Variable expenses } & 115,500 \\\hline \text { Contribution margin } & \$ 94,500 \\\hline \text { Fixed expenses } & 59,400 \\\hline \text { Operating income } & \$ 35,100 \\\hline\end{array} Which of the following statements is not correct?

A) The contribution margin ratio for March was 45%.
B) The margin of safety for March was $78,000.
C) The breakeven point for March was 2,200 units.
D) Each unit sold during March increased operating income $60.
Question
What impact would an increase in fixed costs have on the contribution margin, the margin of safety,
And the breakeven point?

A)
 contribution margin  margin of safety  breakeven point  Increase  No effect  Increase \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { Increase } & \text { No effect } & \text { Increase } \\\hline\end{array}
B)
 contribution margin  margin of safety  breakeven point  Decrease  Increase  Decrease \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { Decrease } & \text { Increase } & \text { Decrease } \\\hline\end{array}
C)
 contribution margin  margin of safety  breakeven point  No effect  Decrease  Increase \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { No effect } & \text { Decrease } & \text { Increase } \\\hline\end{array}
D)
 contribution margin  margin of safety  breakeven point  No effect  Increase  Decrease \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { No effect } & \text { Increase } & \text { Decrease } \\\hline\end{array}
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Deck 18: Cost-Volume-Profit Analysis
1
The total manufacturing cost per unit increases as total production volume increases.
False
2
Fixed costs per unit decrease as production levels decrease.
False
3
A method used to separate mixed costs into fixed and variable components is called the high-low method.
True
4
Which of the following is not a fixed cost?

A) Property taxes
B) Salary of plant manager
C) Indirect materials
D) Straight-line depreciation
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5
Which of the following statements is not correct?

A) The total fixed cost is constant throughout the relevant range of activity.
B) The breakeven point increases if variable costs increase.
C) The margin of safety increases if fixed costs decrease.
D) The mixed cost per unit is constant throughout the relevant range of activity.
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6
Which of the following statements describes variable costs?

A) They are fixed in total throughout the relevant range of activity.
B) They decrease on a per unit basis as production volume increases.
C) They vary on a per unit basis but do not vary in total as production changes.
D) They are constant on a per unit basis but vary in total as production changes.
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7
An electric bill for corporate headquarters is an example of what type of cost?

A) Variable cost
B) Conversion cost
C) Fixed cost
D) Mixed cost
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8
Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs. What was the variable cost per dog wash associated with Jenny's water bill?

A) $.67
B) $1.00
C) $0.50
D) $2.00
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9
Jenny was reviewing the water bill for her doggy day spa and determined that her highest bill, $3,000, occurred in July when she washed 2,000 dogs and her lowest bill, $2,000, occurred in November when she washed 1,000 dogs. What was the fixed cost associated with Jenny's water bill?

A) $1,500
B) $3,000
C) $1,000
D) $2,000
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10
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the contribution margin ratio?

A) 0.70
B) 0.44
C) 0.56
D) 0.30
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11
Marino Company's average manufacturing cost was $5.40 when 50,000 units were manufactured and was
$5)25 when 80,000 units were manufactured. How much was Marino's variable cost per unit?

A) $5.25
B) $5.00
C) $5.40
D) $5.32
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12
If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.
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13
When additional units are sold, the change in operating income is equal to the change in contribution margin.
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14
Both the income statement approach and the contribution margin approach may be used for CVP analysis.
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15
If fixed expenses increase, both the breakeven point and the margin of safety increase.
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16
The Black Corporation and the Blue Company both have a contribution margin ratio of 35%; therefore a $100,000 increase in sales will result in an equal increase in operating income for both companies.
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17
Which of the following is a characteristic of a contribution margin income statement?

A) Variable and fixed expenses are combined into total expenses.
B) When variable costs are less than sales revenue, there is a positive contribution margin.
C) The amount of gross margin is shown.
D) Contribution margin is identified as the difference between sales revenue and total expenses.
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18
Which of the following statements is correct?

A) The contribution margin income statement can be used for external reporting purposes.
B) The contribution margin income statement is relevant for managing a business operation.
C) If a company has a positive contribution margin, its operating income will also be positive.
D) The contribution margin equals gross profit for most all firms.
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19
Pennell Company gathered the following information for the year ended December 31, 2009:
 Fixed costs:  Manufacturing $165,000 Marketing $52,000 Administrative $24,000 Variable costs:  Manufacturing $113,000 Marketing $39,000 Administrative $48,000\begin{array}{|cr|}\hline {\text { Fixed costs: }} \\\hline \text { Manufacturing } & \$ 165,000 \\\hline \text { Marketing } & \$ 52,000 \\\hline \text { Administrative } & \$ 24,000 \\\hline \text { Variable costs: } \\\hline \text { Manufacturing } & \$ 113,000 \\\hline \text { Marketing } & \$ 39,000 \\\hline \text { Administrative } & \$ 48,000 \\\hline\end{array} During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.50 per unit. What is the contribution margin?

A) $209,500
B) $287,500
C) $122,500
D) $246,500
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20
Pennell Company gathered the following information for the year ended December 31, 2009:
 Fixed costs:  Manufacturing $165,000 Marketing $52,000 Administrative $24,000 Variable costs:  Manufacturing $113,000 Marketing $39,000 Administrative $48,000\begin{array}{|cr|}\hline {\text { Fixed costs: }} \\\hline \text { Manufacturing } & \$ 165,000 \\\hline \text { Marketing } & \$ 52,000 \\\hline \text { Administrative } & \$ 24,000 \\\hline \text { Variable costs: } \\\hline \text { Manufacturing } & \$ 113,000 \\\hline \text { Marketing } & \$ 39,000 \\\hline \text { Administrative } & \$ 48,000 \\\hline\end{array} During the year, Pennell produced and sold 75,000 units of product at a sale price of $6.50 per unit. What is the operating income (loss)?

A) $46,500
B) $118,500
C) ($28,500)
D) $94,500
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21
Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. How many dog treats must Canine Company sell to breakeven?

A) 330
B) 471
C) 1,100
D) 194
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22
Canine Company produces and sells dog treats for discriminating pet owners. The unit selling price is $10, unit variable costs are $7, and total fixed costs are $3,300. What is the breakeven point in sales dollars?

A) $11,000
B) $4,714
C) $3,300
D) $7,700
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23
Fixed Company produces a single product selling for $30 per unit. Variable costs are $12 per unit and total fixed costs are $4,000. What is the contribution margin ratio?

A) 1.67
B) 2.50
C) 0.40
D) 0.60
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24
If the sales price per unit is $7, the unit contribution margin is $3, and total fixed expenses are $19,500, what is the breakeven point in units?

A) 2,786
B) 6,500
C) 5,850
D) 4,875
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25
If the sale price per unit is $24.50, the variable expense per unit is $17, and total fixed expenses are $324,000, what is the breakeven point in sales dollars?

A) $734,400
B) $466,946
C) $1,058,400
D) $224,808
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26
Assuming 10,000 units are sold, what is the contribution margin?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $230,000
B) $65,000
C) $150,000
D) $80,000
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27
If sales revenue per unit increases to $25 and 10,000 units are sold, what is the contribution margin?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $150,000
B) $100,000
C) $1,250,000
D) $135,000
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28
If sales revenue per unit decreases to $18 and 15,000 units are sold, what is the operating income?
 Total fixed costs $15,000 Sale price per unit $23 Variable costs per unit $15\begin{array} { | l | r | } \hline \text { Total fixed costs } & \$ 15,000 \\\hline \text { Sale price per unit } & \$ 23 \\\hline \text { Variable costs per unit } & \$ 15 \\\hline\end{array}

A) $270,000
B) $30,000
C) $50,000
D) $45,000
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29
Which of the following statements is not correct?

A) The breakeven point increases and the margin of safety decreases when the contribution margin ratio decreases.
B) The breakeven point decreases and the margin of safety increases when fixed costs decrease.
C) The breakeven point increases and the margin of safety decreases when fixed costs increase.
D) The breakeven point decreases and the margin of safety increases when the variable cost per unit increases.
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30
The Pearson Company has a contribution margin ratio of 25%. Pearson's operating income was $100,000 when sales totaled $1,000,000. What were Pearson's fixed expenses?

A) $250,000
B) $150,000
C) $350,000
D) $225,000
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31
If the sales price per unit is $8.50, the variable expenses per unit is $6.75, and the breakeven point in sales dollars is $331,500, what are total fixed expenses?

A) $22,286
B) $68,250
C) $39,000
D) $26,325
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32
If the sales price per unit is $32, total fixed expenses are $45,000 and the breakeven sales in dollars is $180,000, what is the variable expense per unit?

A) $8.00
B) $4.20
C) $4.00
D) $24.00
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33
If the sales price per unit is $35, the unit contribution margin is $7.50, and total fixed expenses are $56,000, what is the breakeven point in units?

A) 1,600
B) 7,467
C) 2,036
D) 3,733
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34
If the sales price per unit is $68.50, the variable expense per unit is $45, and total fixed expenses are $1,325,400, what is the breakeven point in units?

A) 56,000
B) 56,400
C) 29,453
D) 19,349
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35
If the sales price per unit is $89, total fixed expenses are $456,000, and the breakeven sales in dollars is $760,000, what is the variable expense per unit?

A) $17.80
B) $35.60
C) $44.50
D) $3.42
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36
If the sale price per unit is $21.50, the variable expense per unit is $16.75, and the breakeven point in sales is $634,250, what are total fixed expenses?

A) $494,125
B) $29,500
C) $140,125
D) $179,864
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37
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the current sales price?

A) 8,571 units
B) 20,000 units
C) 6,667 units
D) 10,650 units
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38
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. What is the breakeven point in units at the anticipated sales price next year?

A) 16,667 units
B) 6,667 units
C) 8,571 units
D) 7,143 units
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39
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. If fixed costs were to increase 10% next year, and the new sales price goes into effect, what is the breakeven point in units?

A) 9,429 units
B) 22,000 units
C) 7,333 units
D) 7,857 units
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40
Belton Company currently sells its products for $25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are $150,000. If fixed costs were to decrease 10% during the current year, contribution margin would do what?

A) Increase 10%
B) Remain the same
C) Impossible to determine with the given data
D) Decrease 10%
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41
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the contribution margin per unit?

A) $1.05
B) $7.00
C) $4.55
D) $2.45
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42
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} What is the breakeven point in units?

A) 85,714
B) 37,235
C) 36,735
D) 25,714
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43
Given breakeven sales in units of 22,000 and a unit contribution margin of $2.40, how many units must be sold to reach a target operating income of $4,524?

A) 4,863
B) 11,671
C) 23,885
D) 1,885
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44
The Prentice Company has provided the following information:
 Net sales $1,000,000 Operating income $100,000 Contribution margin ratio 25%\begin{array} { | l | r | } \hline \text { Net sales } & \$ 1,000,000 \\\hline \text { Operating income } & \$ 100,000 \\\hline \text { Contribution margin ratio } & 25 \% \\\hline\end{array} What is the breakeven point in sales dollars?

A) $250,000
B) $400,000
C) $600,000
D) $900,000
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45
The Pearson Corporation has provided the following information pertaining to its most recent year of
 Sales $250,000 Contribution margin ratio 40% Operating income $50,000\begin{array} { | l | r | } \hline \text { Sales } & \$ 250,000 \\\hline \text { Contribution margin ratio } & 40 \% \\\hline \text { Operating income } & \$ 50,000 \\\hline\end{array} What was the breakeven point in sales dollars?

A) $125,000
B) $100,000
C) $200,000
D) $500,000
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46
Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a decrease in the contribution margin per unit?

A) An increase in the selling price per unit.
B) A decrease in fixed costs.
C) A decrease in the hourly wage paid to direct laborers.
D) An increase in the unit cost of direct materials.
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47
The Red Wing Company reported sales of $750,000, a contribution margin ratio of 25%, a variable costof $150 per unit, and fixed costs totaling $125,000. What was the margin of safety in units?

A) 3,750
B) 1,250
C) 2,500
D) 1,000
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48
The Hawk Company reported sales of $960,000, a contribution margin ratio of 30%, a variable costof $210 per unit, and fixed costs totaling $270,000. What was the breakeven point in units?

A) 3,000
B) 386
C) 1,286
D) 1,372
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49
Which of the following would explain why the margin of safety in dollars increased even though totalsales dollars did not change?

A) The breakeven point increased
B) Fixed costs increased
C) The variable cost per unit increased
D) The sales price per unit increased
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50
On a CVP graph, the vertical distance between the total expense line and the total sales revenue line equals the operating income or loss.
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51
On a CVP graph, the increase in the operating income as the sales volume increases is equal to the additional contribution margin that is created by the sale of additional units.
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52
To find the number of units that must be sold to achieve a desired operating income, total fixed expenses plus the desired operating income are divided by the contribution margin ratio.
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53
The increase in the unit breakeven point caused by an increase in fixed costs of $50,000 is equal to the additional number of units that need to be sold in order to increase contribution margin by $50,000.
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54
On a CVP graph, what does the horizontal line intersecting the dollar axis at the level of total cost represent?

A) Total fixed costs
B) Breakeven point
C) Total variable costs
D) Total costs
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55
In a CVP graph, what does the line which begins at the lower left corner represent?

A) Total sales revenue
B) Total variable cost
C) Total fixed cost
D) Both the total variable cost and the total sales revenue
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56
On a CVP graph, the intersection of the sales line and the total cost line is known as the:

A) total cost point.
B) breakeven point.
C) unit contribution margin.
D) margin of safety point.
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57
margin of safety is $500,000 when actual sales are $1,200,000 and the breakeven point in sales is $700,000.
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58
Fairfield Company management has budgeted the following amounts for its next fiscal year:
 Total fixed expenses $832,500 Sale price per unit $40 Variable expenses per unit $25\begin{array} { | l | r | } \hline \text { Total fixed expenses } & \$ 832,500 \\\hline \text { Sale price per unit } & \$ 40 \\\hline \text { Variable expenses per unit } & \$ 25 \\\hline\end{array} If Fairfield Company can reduce fixed expenses by $41,625, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven point in units?

A) $0.75
B) $0.53
C) $0.25
D) $2.78
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59
Fairfield Company management has budgeted the following amounts for its next fiscal year:
 Total fixed expenses $832,500 Sale price per unit $40 Variable expenses per unit $25\begin{array} { | l | r | } \hline \text { Total fixed expenses } & \$ 832,500 \\\hline \text { Sale price per unit } & \$ 40 \\\hline \text { Variable expenses per unit } & \$ 25 \\\hline\end{array} If fixed expenses increase by 10%, to maintain the original breakeven sales in units, the sale price per unit would have to be:

A) decreased by 10%.
B) increased by 3.75%.
C) increased by 3.61%.
D) decreased by 5.55%.
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60
Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. Total fixed costs are $25,000. What will be the effect on the breakeven point if variable costs increase by 10% due to an increase in the cost of direct materials?

A) It will increase by 136 units.
B) It will increase by 242 units.
C) It will decrease by 136 units.
D) It will decrease by 242 units.
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61
If total fixed costs are $95,000, contribution margin per unit is $8.00, and targeted operating income is $30,000, how many units must be sold to breakeven?

A) 11,875
B) 8,125
C) 5,625
D) 3,750
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62
Dakota Company provides the following information about its single product:
 Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000\begin{array} { | l | r | } \hline \text { Targeted operating income } & \$ 40,000 \\\hline \text { Selling price per unit } & \$ 3.50 \\\hline \text { Variable cost per unit } & \$ 1.05 \\\hline \text { Total fixed costs } & \$ 90,000 \\\hline\end{array} How many units must be sold to earn the targeted operating income?

A) 37,143
B) 123,810
C) 53,061
D) 36,735
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63
Given breakeven sales in units of 45,700 and a unit contribution margin of $6, how many units must be sold to reach a target operating income of $25,200?

A) 45,700
B) 49,900
C) 1,813
D) 4,200
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64
If the sales price per unit is $75, variable expenses per unit are $40, target operating income is $22,000, and total fixed expenses are $16,500, how many units must be sold to reach the target operating income?

A) 963
B) 1,100
C) 629
D) 513
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65
If the contribution margin ratio is 26%, target operating income is $32,000, and target sales are $200,000, what are total fixed expenses?

A) $52,000
B) $23,077
C) $20,000
D) $8,320
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66
If target sales in units are 62,300, total fixed expenses are $7,800, and the unit contribution margin is $.15, what is the target operating income?

A) $3,000
B) $1,545
C) $8,175
D) $9,345
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67
Leggins Company sells two products, X and Y. Product X sells for $20 per unit with variable costs of $15. Product Y sells for $24 with variable costs of $20. Total fixed costs for the company are $38,000. Leggins Company typically sells three units of Product X for every unit of Product Y. What is the breakeven point in total units?

A) 2,000 units
B) 6,333 units
C) 6,000 units
D) 8,000 units
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68
Which of the following changes would normally increase the contribution margin per unit the most?

A) A 20% decrease in fixed costs.
B) A 25% increase in the variable cost per unit.
C) A 25% increase in the sales price per unit.
D) A 25% decrease in the variable cost per unit?
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69
The Prentice Corporation has provided the following information pertaining to its most recent year of
 Margin of safety $250,000 Contribution margin ratio 40% Fixed costs $50,000\begin{array} { | l | r | } \hline \text { Margin of safety } & \$ 250,000 \\\hline \text { Contribution margin ratio } & 40 \% \\\hline \text { Fixed costs } & \$ 50,000 \\\hline\end{array} How much were Prentice's total sales during the most recent year?

A) $625,000
B) $375,000
C) $500,000
D) $750,000
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70
The McPherson Company is facing an increase in the variable cost of producing and selling one of its products for the upcoming year. As a result, the sales manager has made a proposal to increase the selling price of the product while increasing the advertising budget at the same time. McPherson has provided the following information regarding the current year results and the proposal made by the sales manager:
 Current Year  Proposal  Unit sales 27,00018,000 Sales price per unit $48$58 Variable cost per unit $30$36 Fixed costs $76,000$96,000\begin{array} { | l | r | r | } \hline & \text { Current Year } & { \text { Proposal } } \\\hline \text { Unit sales } & 27,000 & 18,000 \\\hline \text { Sales price per unit } & \$ 48 & \$ 58 \\\hline \text { Variable cost per unit } & \$ 30 & \$ 36 \\\hline \text { Fixed costs } & \$ 76,000 & \$ 96,000 \\\hline\end{array} Relative to the current year, the sales manager's proposal will:

A) decrease operating income by $90,000.
B) increase contribution margin by $90,000.
C) decrease the unit breakeven point.
D) decrease operating income by $110,000.
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71
Hunter Manufacturing has provided the following information:
 Breakeven point in units 12,500 Variable cost per unit $437.50 Fixed costs $4,062,500 Operating income $1,000,000\begin{array} { | l | l | } \hline \text { Breakeven point in units } & 12,500 \\\hline \text { Variable cost per unit } & \$ 437.50 \\\hline \text { Fixed costs } & \$ 4,062,500 \\\hline \text { Operating income } & \$ 1,000,000 \\\hline\end{array} What is the sales price per unit?

A) $762.50
B) $325.00
C) $517.50
D) $405.00
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72
Lisa Manufacturing has provided the following information:
 Breakeven point in units 25,000 Variable cost per unit $875.00 Fixed costs $8,125,000 Operating income $1,625,000\begin{array} { | l | r | } \hline \text { Breakeven point in units } & 25,000 \\\hline \text { Variable cost per unit } & \$ 875.00 \\\hline \text { Fixed costs } & \$ 8,125,000 \\\hline \text { Operating income } & \$ 1,625,000 \\\hline\end{array} What is the margin of safety in units?

A) 5,000
B) 30,000
C) 35,000
D) 1,857
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73
The following information has been provided by Knauer Corporation:
 Operating income $320,000 Variable cost per unit $220 Fixed costs $800,000 Units sold 16,000\begin{array} { | l | r | } \hline \text { Operating income } & \$ 320,000 \\\hline \text { Variable cost per unit } & \$ 220 \\\hline \text { Fixed costs } & \$ 800,000 \\\hline \text { Units sold } & 16,000 \\\hline\end{array} Which of the following statements is correct?

A) The unit breakeven point can't be determined given the information provided.
B) The sales price per unit was $290.00.
C) The margin of safety can't be determined given the information provided.
D) The contribution margin per unit was $50.00.
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74
Moylan Company has provided the following contribution margin income statement:
 Sales $777,000 Variable expenses $504,000 Contribution margin $273,000 Fixed expenses $212,000 Operating income $61,000\begin{array} { | l | l | } \hline \text { Sales } & \$ 777,000 \\\hline \text { Variable expenses } & \$ 504,000 \\\hline \text { Contribution margin } & \$ 273,000 \\\hline \text { Fixed expenses } & \$ 212,000 \\\hline \text { Operating income } & \$ 61,000 \\\hline\end{array} If the sales volume increases 20%, which of the following statements is correct?

A) The breakeven point will increase 20%.
B) The margin of safety will increase 20%
C) Operating income will increase by more than 20%.
D) Fixed costs will increase 20%.
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75
Bolognese Company's contribution margin income statement for January is as follows:
 Sales (7,770 units) $388,500 Variable expenses 233,100 Contribution margin $155,400 Fixed expenses 65,000 Operating income $90,400\begin{array} { | l | r | } \hline \text { Sales } ( 7,770 \text { units) } & \$ 388,500 \\\hline \text { Variable expenses } & 233,100 \\\hline \text { Contribution margin } & \$ 155,400 \\\hline \text { Fixed expenses } & 65,000 \\\hline \text { Operating income } & \$ 90,400 \\\hline\end{array} If Bolognese were to sell 8,200 units during February, how much would operating income be?

A) $99,000
B) $111,900
C) $96,300
D) $107,300
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76
Bolognese Company's contribution margin income statement for January is as follows:
 Sales (7,770 units) $388,500 Variable expenses 233,100 Contribution margin $155,400 Fixed expenses 65,000 Operating income $90,400\begin{array} { | l | r | } \hline \text { Sales } ( 7,770 \text { units) } & \$ 388,500 \\\hline \text { Variable expenses } & 233,100 \\\hline \text { Contribution margin } & \$ 155,400 \\\hline \text { Fixed expenses } & 65,000 \\\hline \text { Operating income } & \$ 90,400 \\\hline\end{array} Which of the following statements is not correct?

A) The breakeven point in units was 3,250 for the month of January.
B) The margin of safety was $226,000 for the month of January.
C) The contribution margin ratio was 40% for the month of January.
D) A 10% increase in sales would have resulted in a 10% increase in operating income during January.
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77
During the most recent year, RDJ Company reported sales of $1,200,000, variable expenses of $720,000, and a margin of safety of $450,000. How much were RDJ's fixed expenses?

A) $30,000
B) $18,000
C) $48,000
D) $27,000
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78
Claire Corporation's contribution margin income statement for March is as follows:
 Sales (2,500 units) $112,500 Variable expenses 78,750 Contribution margin $33,750 Fixed expenses 15,000 Operating income $18,750\begin{array} { | l | r | } \hline \text { Sales (2,500 units) } & \$ 112,500 \\\hline \text { Variable expenses } & 78,750 \\\hline \text { Contribution margin } & \$ 33,750 \\\hline \text { Fixed expenses } & 15,000 \\\hline \text { Operating income } & \$ 18,750 \\\hline\end{array} Claire's manager has proposed that the unit selling price be increased by 10% for the month of April. The manager believes that the selling price increase will result in a 250 unit decrease in sales during April. Should the manager's proposal be accepted?

A) Yes, because operating income will increase $6,750.
B) No, because contribution margin will decrease $3,375.
C) No, because operating income will decrease $1,875.
D) Yes, because contribution margin will increase $10,125.
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79
Hill Corporation's contribution margin income statement for March is as follows:
 Sales (3,500 units) $210,000 Variable expenses 115,500 Contribution margin $94,500 Fixed expenses 59,400 Operating income $35,100\begin{array} { | l | r | } \hline \text { Sales (3,500 units) } & \$ 210,000 \\\hline \text { Variable expenses } & 115,500 \\\hline \text { Contribution margin } & \$ 94,500 \\\hline \text { Fixed expenses } & 59,400 \\\hline \text { Operating income } & \$ 35,100 \\\hline\end{array} Which of the following statements is not correct?

A) The contribution margin ratio for March was 45%.
B) The margin of safety for March was $78,000.
C) The breakeven point for March was 2,200 units.
D) Each unit sold during March increased operating income $60.
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80
What impact would an increase in fixed costs have on the contribution margin, the margin of safety,
And the breakeven point?

A)
 contribution margin  margin of safety  breakeven point  Increase  No effect  Increase \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { Increase } & \text { No effect } & \text { Increase } \\\hline\end{array}
B)
 contribution margin  margin of safety  breakeven point  Decrease  Increase  Decrease \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { Decrease } & \text { Increase } & \text { Decrease } \\\hline\end{array}
C)
 contribution margin  margin of safety  breakeven point  No effect  Decrease  Increase \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { No effect } & \text { Decrease } & \text { Increase } \\\hline\end{array}
D)
 contribution margin  margin of safety  breakeven point  No effect  Increase  Decrease \begin{array} { | l | l | l | } \hline \text { contribution margin } & \text { margin of safety } & \text { breakeven point } \\\hline \text { No effect } & \text { Increase } & \text { Decrease } \\\hline\end{array}
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