If the fixed expenses increase in a company, and all other factors remain unchan
ID: 2365751 • Letter: I
Question
If the fixed expenses increase in a company, and all other factors remain unchanged, then one would expect the margin of safety to decrease.A) True
B) False
2.
A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole.
A) True
B) False
MC
3.
TB 31 The degree of operating leverage can be calculated as:
A) contribution margin divided by sales.
B) gross margin divided by net operating income.
C) net operating income divided by sales.
D) contribution margin divided by net operating income.
4.
TB 53 Balonek Inc.'s contribution margin ratio is 57% and its fixed monthly expenses are $41,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $112,000?
A) $63,840
B) $7,160
C) $71,000
D) $22,840
5.
TB 103 Fjeld Corporation produces and sells two products. In the most recent month, Product C66G had sales of $20,000 and variable expenses of $7,200. Product U11T had sales of $19,000 and variable expenses of $8,400. And the fixed expenses of the entire company were $21,740. If the sales mix were to shift toward Product C66G with total dollar sales remaining constant, the overall break-even point for the entire company:
A) would increase.
B) would not change.
C) would decrease.
D) could increase or decrease.
6.
TB 127 Pedulla Inc, which produces and sells a single product, has provided its contribution format income statement for February.
If the company sells 2,900 units, its net operating income should be closest to:
A) $35,581
B) $44,800
C) $31,900
D) $58,000
7.
TB 97 Sperberg Corporation's operating leverage is 3.7. If the company's sales increase by 12%, its net operating income should increase by about:
A) 44.4%
B) 3.7%
C) 12.0%
D) 30.8%
8.
TB 62 Data concerning Moscowitz Corporation's single product appear below:
Fixed expenses are $375,000 per month. The company is currently selling 8,000 units per month. The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $23,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 3,100 units. What should be the overall effect on the company's monthly net operating income of this change?
A) Decrease of $128,900
B) Increase of $426,500
C) Increase of $8,900
D) Increase of $128,900
9.
ATB 25 The break-even point in unit sales is found by dividing total fixed expenses by:
A) the contribution margin ratio.
B) the variable expenses per unit.
C) the sales price per unit.
D) the contribution margin per unit.
TB 26 Break-even analysis assumes that:
A) total costs are constant.
B) the average fixed expense per unit is constant.
C) the average variable expense per unit is constant.
D) variable expenses are nonlinear.
Explanation / Answer
1A) True 2A) True 3D) contribution margin divided by net operating income 4D) $22,840 : Net Inc = CMRatio*Sales - FC 5C) would decrease. 6Picture missing 7A) 44.4% ; operating leverage is 3.7. So CM=3.7*NI*12% 8Picture missing 9D) the contribution margin per unit. 10 C) the average variable expense per unit is constant