ACCT 2210 Exam 2

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

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Unit volume

What is Ralph Corporation's margin of safety in dollars?

$1 million

If sales increase by $50,000, what will be the net operating income for the company?

$55,000

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

The measure of how sensitive net operating income is to a given percentage change in volume sales is called _______.

Operating leverage

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 the company's contribution margin for January?

$13,200

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

Max, Incorporated, has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000, respectively. What is the segment margin for the South Division?

$200,000

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

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?

$300

What is the cost of goods sold for the month of January using the absorption costing method?

$32,000

Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively. Assuming the traceable fixed costs of the television division are $300,000, what is the segment margin of the mobile phone division?

$400,000

What are the sales dollars required to attain a target profit of $120,000?

$400,000

Assuming the variable costing method is used, what is the total manufacturing costs added to work in process during the month of February?

$52,000

If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company's net operating income decrease?

$83,700

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 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, Incorporated, 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, Incorporated?

60%

With regards to interpretation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

What is usually plotted as a horizontal line on the CVP graph?

Fixed expenses

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________.

Fixed overhead costs

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

When the units produced are equal to the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is equal to

When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is greater than

When the units produced exceed the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is less than

Decide how each cost is treated on an income statement prepared using the variable costing approach. Period cost or product cost? Fixed Manufacturing Overhead

Period Cost

Decide how each cost is treated on an income statement prepared using the variable costing approach. Period cost or Product cost? Direct Labor

Product Cost

Decide how each cost is treated on an income statement prepared using the variable costing approach. Period cost or product cost? Variable Manufacturing Overhead

Product Cost

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses

Contribution margin equals ________.

Sales minus variable cost

Break-even point is the level of sales at which ______.

Total revenue equals total cost

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

Unit contribution margin

Which of the following costing approaches is best suited for cost-volume-profit analysis?

Variable

Absorption costing income statements ignore ________.

Variable and fixed cost distinctions

Assuming the absorption costing method is used, what is the total manufacturing costs per unit added to work in process during the month of February?

$92,000

What is Ralph Corporation's margin of safety in percentage?

20%

When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________.

Less than absorption costing net operating income

Decide how each cost is treated on an income statement prepared using the variable costing approach. Period cost or product cost? Fixed Selling and Administrative Expenses

Period Cost

Decide how each cost is treated on an income statement prepared using the variable costing approach. Period cost or product cost? Variable Selling and Administrative Expenses

Period Cost