cost-volume- profit analysis multiple questions

7/29/2019 Cost-volume- profit Analysis Multiple questions

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1 . H. D. Hudso n Manufa cturing Company p roduces a product t hat sells for $ 120. A sellingcommission of 10 % of the selling price is paid on each unit sold. Variable ma nufacturing costs

are $6 0 per unit . Fixed manufacturing costs are $20 per u nit based on the current level of

activity, and fixed selling and administrative costs are $16 per un it. The cont ribution margin

per unit is:

a. $ 104

b. 72c. 60

d. 48

2 . Show case Metalw orks I nc. has provided the follow ing data:

If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by20% , and all other factors remain the same, net income w ill:

a . Decrease by $60 ,000

b . I ncrease by $60,000

c. I ncrease by $120 ,000

d . I ncrease by $420 ,000

3 . Arroyo Corporation produced and sold 80,000 units and reported sales of $ 4,000,000 duringthe past year. Management d etermined that va riable expenses totaled $2,800,000 and fixed

expenses totaled $720,000. What is the company's contribution margin ratio?

a. 30%

b. 70%

c. 150%d. 250%

4 . Ashland Burglar Alarms In c. sells a single pr oduct. The produ ct has a selling pr ice of $50 perunit and variable expenses of 80% of sales. If t he company's f ixed expenses total $150,000

pe r year, t hen it w ill have a break-e ven point in sales dollars of:

a. $750 ,000

b. $187 ,500

c. $15,000

d. $3750

5 . High Fidelity Audio Inc. reported sales of $8,000,000 for the month and incurred variable

expenses totaling $5,600,000 and fixed expenses totaling $1,440,000. The company has nobeginning or ending inventories. A total o f 80,000 units we re produced and sold last month. I f

sales increase by 200 u nits, how much shou ld net income increase?

a. $1,600

b. $6,000

c. $10,000

d. $ 1 9 , 2 0 0


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6 . High Fidelity Audio Inc. reported sales of $8,000,000 for the month and incurred variableexpenses totaling $5,600,000 and fixed expenses tota ling $1 ,440,000. The company has no

beginning or ending inventories. A to tal of 8 0,000 units we re produced and sold last month.

How many units wo uld the company have to sell to achieve a desired pro fit of $1,200,000?

a. 88,000

b. 100,000

c. 106,668d. 150,000

7 . High Fidelity Audio I nc. reported sales of $ 8,000,000 for the month and incurred variableexpenses totaling $5,600,000 and fixed expenses totaling $1,440,000. The company has no

beginning or ending inventories. A total o f 80,000 units we re produced and sold last month.

What is the company's break-even in units?

a. 0 un its

b . 4 8,0 00 u nits

c. 7 2,0 00 u nits

d . 8 0,0 00 u nits

8 . High Fidelity Audio Inc. reported sales of $8,000,000 for the month and incurred variableexpenses totaling $5,600 ,000 and fixed expenses t otaling $1,440,000. The company has no

beginning or ending inventories. A to tal of 8 0,000 units we re produced and sold last month.

What is the company's margin of safety in dollars?

a. $480 ,000

b . $ 2,4 00 ,00 0

c. $ 3,2 00 ,00 0

d . $ 3,5 20 ,00 0

9. High Fidelity Audio Inc. reported sales of $8,000,000 for the month and incurred variable

expenses totaling $5,600,000 and fixed expenses totaling $1,440,000. The company has no

beginning or ending inventories. A total o f 80,000 units we re produced and sold last month.

What is the company's degree of operating leverage?

a. 0.12

b. 0.4

c. 2.5

d. 3.3

10. Slatte ry Company sells t hree products: A, B and C. Product A's un it contribution mar gin is

higher t han Produ ct B's and Product B's is higher t han Products C's. Wh ich one of the follow ing

events is most likely to increase the company's overall break-even point?

a. The instal lat ion of new automated equipment and subsequent lay-off of factory workers

b. A decrease in Product C's sell ing price

c. An increase in the overall market demand for Product B

d. A change in the relative market demand for the products, w ith the increase favor ing

Product C relat ive to Product B and Produ ct A


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cost-volume- profit analysis multiple questions

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