Chapter 5
Taylor Company has current sales of 1,000 units, which generates sales revenue of $190,000, variable costs of $76,000, and fixed expenses of $96,000. The company believes sales will increase by 300 units, if advertising increases by $20,000. What is the change in net operating income after the changes?
Increase of $14,200
Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. What is the profit from the sale of 100 bicycles?
$12,000
Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?
$200
What is Ralph Corporation's margin of safety in dollars?
$1 million
What is the amount of the break-even sales for Grace Food Company?
$1.5 million
Taylor Company has current sales of 1,000 units, at a selling price of $190 per unit, variable costs per unit of $76, and fixed expenses of $96,000. The company believes sales will increase by 300 units, if the company introduces sales commissions as an incentive for the sales staff. The change will decrease the selling price to $175 per unit, increase variable cost per unit to $100, and decrease fixed expenses by $20,000. What is the net operating income after the changes?
$21,500
Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company's fixed expenses are $10,000. What is the company's break-even point in sales dollars?
$25,000
If sales increase by $50,000, what will be the net operating income for the company?
$55,000
Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company's fixed expenses are $5,000. What is the company's break-even point in unit sales?
100 units
What is Ralph Corporation's margin of safety in percentage?
20%
Winter Corporation's current sales are $500,000. The contribution margin is $300,000 and the net operating income is $100,000. What is the company's degree of operating leverage?
3.00
What are the unit sales required to attain a target profit of $120,000?
4,000 units
Cartier Corporation currently sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's variable cost ratio?
40%
Cartier Corporation currently sells it sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's contribution margin ratio?
60%
The current sales of Trent, Inc., are $400,000, with a contribution margin of $200,000. The company's degree of operating leverage is 2. If the company anticipates a 30% increase in sales, what is the percentage change in net operating income for Trent, Inc.?
60%
A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.
Decrease
The measure of how sensitive net operating income is to a given percentage change in volume sales is called _______.
Operating leverage
Contribution Margin equals ______
Sales - Variable cost
Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit
Unit contribution margin
What are the sales dollars required to attain a target profit of $120,000?
$400,000
Walton Corporation is currently selling 104 units of its product. The company is deciding the price that it should charge for a bulk order of 40 units. The variable cost per unit is $200. This order will not involve any additional fixed costs and the company's current sales will not be affected. The company targets a profit of $4,000 on the bulk order. What selling price per unit should the company quote for the bulk order? (Round your answer to the nearest whole dollar.)
Selling price per unit: 300
Break-even point is the level of sales at which
Total revenue equals total costs