ACCT Test 3 Chapt 19

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income? 1)$120,000 2)$216,000 3)$504,000 4)$720,000

1)$120,000 ($2,000,000 x .36) - $600,000 = $120,000

Hinge Manufacturing's cost of goods sold is $420,000 variable and $240,000 fixed. The company's selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company's sales is $1,580,000, what is its net income? 1)$260,000 2)$860,000 3)$920,000 4)$980,000

1)$260,000 $1,580,000 - $420,000 - $240,000 - $300,000 - $360,000 = $260,000

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $240,000. What was Teller's 2016 net income? 1)$300,000 2)$540,000 3)$1,260,000 4)$1,800,000

1)$300,000 [($600 - $420) x 3,000] - $240,000 = $300,000

Woolford's CVP income statement included sales of 5,000 units, a selling price of $50, variable expenses of $30 per unit, and net income of $25,000. Fixed expenses are 1)$75,000. 2)$100,000. 3)$150,000. 4)$250,000.

1)$75,000. [($50 - $30) x 5,000] - $25,000 = $75,000

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2017. What is Teller's break-even point in sales dollars for 2017? 1)$900,000 2)$2,700,000 3)$1,800,000 4)$2,571,429

1)$900,000 $270,000 / (($600 - $420) / $600) = $900,000

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2017. What is Teller's break-even point in units for 2017? 1)1,500 2)643 3)450 4)750

1)1,500 $270,000 / ($600 - $420) = 1,500 units

In 2016, Carow sold 3,000 units at $500 each. Variable expenses were $250 per unit, and fixed expenses were $500,000. The same selling price is expected for 2017. Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, while decreasing variable costs per unit by 20%. What is Carow's break-even point in units for 2017? 1)2,000 2)2,400 3)2,500 4)3,000

1)2,000 ($500,000 x 1.20) / ($500 - ($250 x .80) = 2,000 units

Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.How many Standards would Roosevelt sell at the break-even point? 1)24,000 2)36,000 3)40,000 4)60,000

1)24,000 $1,800,000 / $30 = 60,000 40,000 / [(40,000 + 60,000) x 60,000] = 24,000

Ramirez Corporation sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. Ramirez's fixed costs are $891,000. How many units of Q-Drive would be sold at the break-even point? 1)3,300 2)4,455 3)11,000 4)7,700

1)3,300 [.30 x ($150 - $90)] + [.70 x ($195 - $105)] = $81 $891,000 / $81 = 11,000 11,000 x .30 = 3,300 units

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.The weighted-average contribution margin ratio is 1)37%. 2)40%. 3)43%. 4)50%.

1)37%. ((.65 x .30) + (.35 x .50)) = .37 or 37%

Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of Product B annually. The sales mix for Product A is 1)40%. 2)60%. 3)67%. 4)Cannot determine from information given.

1)40%. 4,000 / (4,000 + 6,000) = .40 or 40%

The CVP income statement classifies costs 1)as variable or fixed and computes contribution margin. 2)by function and computes a contribution margin. 3)as variable or fixed and computes gross margin. 4)by function and computes a gross margin.

1)as variable or fixed and computes contribution margin.

Cost-volume-profit analysis is the study of the effects of 1)changes in costs and volume on a company's profit. 2)cost, volume, and profit on the cash budget. 3)cost, volume, and profit on various ratios. 4)changes in costs and volume on a company's profitability ratios.

1)changes in costs and volume on a company's profit.

In a sales mix situation, at any level of units sold, net income will be higher if 1)more higher contribution margin units are sold than lower contribution margin units. 2)more lower contribution margin units are sold than higher contribution margin units. 3)more fixed expenses are incurred. 4)weighted-average unit contribution margin decreases.

1)more higher contribution margin units are sold than lower contribution margin units.

For Wilder Corporation, sales is $1,600,000 (8,000 units), fixed expenses are $480,000, and the contribution margin per unit is $80. What is the margin of safety in dollars? 1)$80,000 2)$400,000 3)$720,000 4)$1,120,000

2)$400,000 $480,000 / ($80 /$200) = $1,200,000 $1,600,000 - $1,200,000 = $400,000

For Buffalo Co., at a sales level of 4,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit? 1)$5.25 2)$6.25 3)$12.50 4)$18.75

2)$6.25 ($75,000- $50,000) / 4,000 = $6.25

Hinge Manufacturing's cost of goods sold is $420,000 variable and $240,000 fixed. The company's selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company's sales is $1,580,000, what is its contribution margin? 1)$260,000 2)$860,000 3)$920,000 4)$980,000

2)$860,000 $1,580,000 - $420,000 - $300,000 = $860,000

Margin of safety in dollars is 1)expected sales divided by break-even sales. 2)expected sales less break-even sales. 3)actual sales less expected sales. 4)expected sales less actual sales.

2)expected sales less break-even sales.

Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.At the expected sales level, Roosevelt's net income will be 1)$(300,000). 2)$ - 0 -. 3)$1,200,000. 4)$3,000,000.

3)$1,200,000. $30 x (60,000 + 40,000)) - $1,800,000 = $1,200,000

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What are the total variable expenses? 1)$384,000 2)$720,000 3)$1,280,000 4)$2,000,000

3)$1,280,000 $2,000,000 x (1-.36) = $1,280,000

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Contribution margin is 1)$500,000. 2)$300,000. 3)$200,000. 4)$90,000.

3)$200,000. ($100 - $60) x 5,000 = $200,000

For Wickham Co., sales is $3,000,000, fixed expenses are $900,000, and the contribution margin ratio is 36%. What is required sales in dollars to earn a target net income of $600,000? 1)$1,666,667 2)$2,500,000 3)$4,166,667 4)$8,333,333

3)$4,166,667 ($900,000 + $600,000) / .36 = $4,166,667

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is 1)4%. 2)28%. 3)32%. 4)68%.

3)32%. ($500,000 - $340,000) / $500,000 = .32 or 32%

The margin of safety ratio is 1)expected sales divided by break-even sales. 2)expected sales less break-even sales. 3)margin of safety in dollars divided by expected sales. 4)margin of safety in dollars divided by break-even sales.

3)margin of safety in dollars divided by expected sales.

Contribution margin is the amount of revenue remaining after deducting 1)cost of goods sold. 2)fixed costs. 3)variable costs. 4)contra-revenue.

3)variable costs.

In 2016, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000. Variable expenses were $300 per unit, and fixed expenses were $160,000. The same selling price is expected for 2017. Raleigh's variable cost per unit will rise by 10% in 2017 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000. How many units must Raleigh sell in 2017 to maintain the same income level as 2016? 1)882 2)1,000 3)1,056 4)1,118

4)1,118 (($160,000 - $10,000) + $40,000) / ($500 - ($300 x 1.10)) = 1,118 units

In 2016, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $780,000. The same variable expenses per unit and fixed expenses are expected for 2017. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2017? 1)5,200 2)5,416 3)5,760 4)6,000

4)6,000 $780,000 / (($500 x .96) - $350) = 6,000 units

The contribution margin ratio is 1)sales divided by contribution margin. 2)sales divided by fixed expenses. 3)sales divided by variable expenses. 4)contribution margin divided by sales.

4)contribution margin divided by sales.

In a CVP income statement, a selling expense is generally 1)completely a variable cost. 2)completely a fixed cost. 3)neither a variable cost nor a fixed cost. 4)partly a variable cost and partly a fixed cost.

4)partly a variable cost and partly a fixed cost.

In a CVP income statement, cost of goods sold is generally 1)completely a variable cost. 2)completely a fixed cost. 3)neither a variable cost nor a fixed cost. 4)partly a variable cost and partly a fixed cost.

4)partly a variable cost and partly a fixed cost.