Market Sales had $1,200,000 in sales last month.

The variable cost ratio was 60% and operating profits were
$80,000. What is Market's margin of safety in sales dollars?
$500,000.
$200,000.
$300,000.
Cannot determine with the information given.

An increase in an organization's fixed costs will result in a lower margin of safety, assuming all other costs and sales
remain unchanged.

True

False

If an organization's fixed costs are $2,400, tax rate is 40%, and contribution margin is $5,200, then its after-tax
operating profits are $1,680.

True

False

Artis Sales has two store locations. Store A has fixed costs of $125,000 per month and a variable cost ratio of 60%.
Store B has fixed costs of $200,000 per month and a variable cost ratio of 30%. What is the break-even sales volume
for Store A?
$325,000.
$312,500.
$208,333.
Cannot determine with the information given.

An organization's operating leverage is high when it has a low proportion of variable costs in its total costs.

True

False
Schister Systems uses the following data in its Cost-Volume-Profit analyses:

Total
Sales $ 395,000
Variable expenses 197,500
Contribution margin 197,500
Fixed expenses 119,000
Net operating income $ 78,500

What is total contribution margin if sales volume increases by 20%?

$237,000
$94,200
$62,800
$197,500
Dorcan Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts
sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell
20,000 shirts to break-even. The after tax net income last year was $5,040. Donnelly's expectations for the coming
year include the following: (CMA adapted)

The sales price of the T-shirts will be $9.

∙ Variable cost to manufacture will increase by one-third.
∙ Fixed costs will increase by 10%.
∙ The income tax rate of 40% will be unchanged.

The selling price that would maintain the same contribution margin ratio as last year is:
$9.50.
$10.00.
$9.00.
$8.25.

Data concerning Bedwell Enterprises Corporation's single product appear below:

Selling price per unit $ 200.00

Variable expenses per unit $ 95.50
Fixed expense per month $ 441,890
The unit sales to attain the company's monthly target profit of $27,000 is closest to: (Do not round intermediate
calculations.)
4910
2344
4487
4229
If the fixed costs are $2,400, targeted before-tax operating profit is $1,200, tax rate is 25%, selling price per unit is
$2, and contribution margin ratio is 40%, then the sales volume is 9,000 units.

True

False
Lake Sales had $2,200,000 in sales last month. The contribution margin ratio was 30% and operating profits were
$180,000. What sales volume does Lake's need to yield a $240,000 operating profit?
$2,440,000.
$600,000.
$2,400,000.
$2,020,000.
Last year Easton Corporation reported sales of $900,000, a contribution margin ratio of 40% and a net loss of
$42,000. Based on this information, the break-even point was:
$1,005,000
$942,000
$1,110,000
$795,000
Break-even analysis assumes that over the relevant range: (CPA adapted)
Total Fixed Costs are nonlinear.
Total Costs are unchanged.
Unit Variable Costs are
unchanged.
Unit Revenues are nonlinear.

Break-even analysis assumes that:

total costs are constant.
the average fixed cost per unit is constant.
the average variable cost per unit is constant.
variable costs are nonlinear.

Dartmount Corporation has provided its contribution format income statement for June. The company produces
and sells a single product.

Sales (2,900 units) $ 269,700

Variable costs 107,300
Contribution margin 162,400
Fixed costs 137,100
Operating profit $ 25,300
If the company sells 3,100 units, its total contribution margin should be closest to:
$162,400.
$173,600.
$181,000.
$27,045.

The break-even point for an organization with a low operating leverage will be relatively higher than the break-even
point for an organization with a high operating leverage.

True

False

Market Sales had $1,200,000 in sales last month. The variable cost ratio was 60% and operating profits were
$80,000. What sales volume does Market's need to yield a $200,000 operating profit?
$1,000,000.
$1,500,000.
$1,200,000.
$2,000,000.
A company's break-even point will not be changed by:
a change in the variable cost per unit.
a change in total fixed costs.
a change in the selling price per unit.
a change in the income tax rate.
Flower Company manufactures and sells a single product that has a positive contribution margin. If the selling price and
variable costs both decrease by 5% and fixed costs do not change, then what would be the effect on the contribution
margin per unit and the contribution margin ratio?

Contribution margin per unit Contribution margin ratio

A. Decrease Decrease

B. Decrease No change

C. No change Decrease

D. No change No change

Which of the following changes to a company's contribution income statement will always lower the break-even point
(either in units or in dollars)?

Sales price decreases by 5%.

Variable costs decrease by 5% and fixed costs increase by 10%.

Variable costs increase by 10% and fixed costs decrease by 5%.

Sales price increases by 10%.

Moyas Corporation sells a single product for $10 per unit. Last year, the company's sales revenue was $250,000 and
its net operating income was $42,000. If fixed expenses totaled $83,000 for the year, the break-even point in unit
sales was:
29,200 units
25,000 units
12,500 units
16,600 units
An increase in the selling price per unit will decrease an organization's operating leverage, assuming sales unit
volume doesn't change and there are no other changes in its cost structure.

True

False
Opal Company manufactures a single product that it sells for $90 per unit and has a contribution margin ratio of
35%. The company's fixed costs are $46,800. If Opal desires a monthly target operating profit equal to 15% of sales,
sales will have to be (rounded):
3,467 units.
1,486 units.
1,040 units.
2,600 units.

Gardner Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro
forma income statement for the current year is presented below.

Sales $ 1,500,000
Cost of sales:
Direct Material $ 250,000
Direct labor 150,000
Variable Overhead 75,000
Fixed Overhead 100,000 575,000
Gross Profit $ 925,000
Selling and General & Admin. Exp.
Variable 200,000
Fixed 250,000 450,000
Operating Income $ 475,000
For the coming year, the management of Gardner Corporation anticipates a 10 percent increase in sales, a 12
percent increase in variable costs, and a $45,000 increase in fixed costs.
The break-even point for next year (rounded to the nearest dollar) would be:
$729,027.
$214,018.
$862,103.
$474,000.
The Frances Manufacturing Company sells two products, FRN and CES. FRN has a higher contribution margin ratio
than CES. If the product mix shifts towards CES, the company's break-even point in total units (i.e., FRN plus CES) will
increase.

True

False
Jilk Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $50,000. 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 $142,000?
$92,000
$86,620
$5380
$36,620
Cost-volume-profit (CVP) analysis assumes that the production volume equals sales volume so that any changes in
unit prices can be ignored.

True

False

Lamar has the following data:

Selling Price $ 40
Variable manufacturing cost $ 22
Fixed manufacturing cost $ 150,000per month
Variable selling & administrative costs $ 6
Fixed selling & administrative costs $ 120,000per month
How many units must Lamar produce and sell in order to achieve a profit of $30,000 per month?
10,000 units.
8,824 units.
15,000 units.
25,000 units.
Liu Sales has two store locations. Sanford has fixed costs of $250,000 per month and a contribution margin ratio of
35%. Orlando has fixed costs of $400,000 per month and a contribution margin ratio of 65%. At what sales volume
would the two stores have equal profits or losses?
$500,000.
$1,300,000.
$650,000.
Cannot determine with the information given.

Data concerning Follick Corporation's single product appear below:

Selling price per unit $ 240.00

Variable expense per unit $ 76.80
Fixed expense per month $ 146,880

The break-even in monthly dollar sales is closest to:

$285,120
$146,880
$432,000
$216,000

The total contribution margin is the unit contribution margin multiplied by the number of units minus the fixed
component of the total costs (TC).

True

False
Both total revenues (TR) and total costs (TC) are likely to be affected by changes in the output.

True

False
A cement manufacturer has supplied the following data:

Tons of cement produced and sold 260,000

Sales revenue $ 964,000
Variable manufacturing expense $ 229,000
Fixed manufacturing expense $ 304,000
Variable selling and administrative expense $ 108,400
Fixed selling and administrative expense $ 90,000
Net operating income $ 232,600

The company's contribution margin ratio is closest to:

24.1%
44.7%
65.0%
68.5%

At the break-even point, the total contribution margin equals total: (CPA adapted)
 Selling and administrative costs.
Variable costs.
Fixed costs.
Sales.

Obtuse Company's fixed costs total $150,000, its variable cost ratio is 60% and its variable costs are $4.50 per unit.
Based on this information, the break-even point in units is:
100,000.
Selected 50,000.
37,500.
33,333.

Ingrum Corporation produces and sells two products. In the most recent month, Product R38T had sales of $36,000
and variable expenses of $9440. Product X08S had sales of $57,000 and variable expenses of $18,460. The fixed
expenses of the entire company were $37,030.

The break-even point for the entire company is closest to:

$93,000
$64,461
Selected $52,900
$37,030

If an organization's fixed costs are $2,400, tax rate is 40%, and contribution margin is $5,200, then its after-tax
operating profits are $1,680.
True selected
False

Lamar has the following data:

Selling Price $ 40
Variable manufacturing cost $ 22
Fixed manufacturing cost $ 150,000per month
Variable selling & administrative costs $ 6
Fixed selling & administrative costs $ 120,000per month
How many units must Lamar produce and sell in order to break-even?
8,333 units.
15,000 units.
Selected 22,500 units.
12,500 units.

Awtis Corporation has a margin of safety percentage of 25% based on its actual sales. The break-even point is
$330,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:
$16,500
selected $88,000
$60,500
$45,375
Winters Company sells three products. Sales and contribution margin ratios for the three products follow:

Product A Product B Product C

Sales in dollars $ 20,000 $ 40,000 $ 100,000
Contribution margin ratio 45% 40% 15%
Given these data, the contribution margin ratio for the company as a whole would be:
25%.selected
33.3%.
75%.
Cannot determine with the information
given.

A company's break-even point will not be increased by:

a decrease in the selling price per unit.
an increase in the variable cost ratio.
an increase in the variable cost per unit.
selecte an increase in the number of units produced and sold.
d