Chapter 6 Cost

True/False Questions 1.
One way to compute the total contribution margin is to add total fixed expenses to net operating income. Ans: True AACSB: A#C$A %&: eporting eflecti!e Thin"ing A#C$A BB: Critical Thin"ing 'O: 1 'e!el: (edium
). On a C*$ graph for a profitable company+ the total re!enue line will be steeper than the total cost line. Ans: True AACSB: Analytic A#C$A %&: eporting 'O: ) A#C$A BB: Critical Thin"ing 'e!el: ,asy
-. #n two companies ma"ing the same product and with the same total sales and total expenses+ the contribution margin ratio will be lower in the company with a higher proportion of fixed expenses in its cost structure. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: A#C$A BB: Critical Thin"ing 'e!el: (edium
.. #f the !ariable expense per unit increases+ and all other factors remain constant+ the contribution margin ratio will increase. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: A#C$A BB: Critical Thin"ing 'e!el: (edium
/. The impact on net operating income of any gi!en dollar change in total sales can be estimated by multiplying the C( ratio by the dollar change in total sales. Ans: True AACSB: A#C$A %&: eporting eflecti!e Thin"ing A#C$A BB: Critical Thin"ing 'O: - 'e!el: ,asy
0. A company with sales of 123+333 and !ariable expenses of 1.3+333 should spend 113+333 on increased ad!ertising if the increased ad!ertising will increase sales by 1)3+333. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: . A#C$A BB: Critical Thin"ing 'e!el: (edium
Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition
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2. The formula for the brea"4e!en point is the same as the formula to attain a gi!en target profit for the special case where the target profit is 5ero. Ans: True AACSB: A#C$A %&: eporting eflecti!e Thin"ing A#C$A BB: Critical Thin"ing 'O: /6 0 'e!el: (edium
7. An increase in total fixed expenses will not affect the brea"4e!en point so long as the contribution margin ratio remains unchanged. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: / A#C$A BB: Critical Thin"ing 'e!el: (edium
8. All other things the same+ a reduction in the !ariable expense per unit will cause the brea"4e!en point to rise. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: / A#C$A BB: Critical Thin"ing 'e!el: (edium
13. The unit sales !olume necessary to reach a target profit is determined by di!iding the target profit by the contribution margin per unit. Ans: %alse AACSB: A#C$A %&: eporting eflecti!e Thin"ing A#C$A BB: Critical Thin"ing 'O: 0 'e!el: (edium
11. All other things the same+ the margin of safety in dollars at a gi!en le!el of sales will tend to be lower for a capital4intensi!e company than for a labor4intensi!e company with high !ariable expenses. Ans: True AACSB: Analytic A#C$A %&: eporting 'O: 2 A#C$A BB: Critical Thin"ing 'e!el: (edium
1). The margin of safety in dollars e9uals the excess of budgeted :or actual; sales o!er the brea"4e!en !olume of sales. Ans: True AACSB: A#C$A %&: eporting eflecti!e Thin"ing A#C$A BB: Critical Thin"ing 'O: 2 'e!el: ,asy
1-. A company with high operating le!erage will experience a lower reduction in net operating income in a period of declining sales than will a company with low operating le!erage. Ans: %alse AACSB: Analytic A#C$A %&: eporting 'O: 7 A#C$A BB: Critical Thin"ing 'e!el: (edium

1.. #f < is the 9uantity of a product sold+ $ is the price per unit+ * is the !ariable expense per unit+ and % is the total fixed expense+ then the degree of operating le!erage is e9ual to: =<:$4*;> ? =<:$4*;4%> Ans: True AACSB: Analytic A#C$A %&: eporting 'O: 7 A#C$A BB: Critical Thin"ing 'e!el: @ard
1/. A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will raise the brea"4e!en point. Ans: True AACSB: Analytic A#C$A %&: eporting 'O: 8 Multiple Choice Questions 10. Contribution margin can be defined as: A; the amount of sales re!enue necessary to co!er !ariable expenses. B; sales re!enue minus fixed expenses. C; the amount of sales re!enue necessary to co!er fixed and !ariable expenses. A; sales re!enue minus !ariable expenses. Ans: A AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy 12. Bhich of the following statements is correct with regard to a C*$ graphC A; A C*$ graph shows the maximum possible profit. B; A C*$ graph shows the brea"4e!en point as the intersection of the total sales re!enue line and the total expense line. C; A C*$ graph assumes that total expense !aries in direct proportion to unit sales. A; A C*$ graph shows the operating le!erage as the gap between total sales re!enue and total expense at the actual le!el of sales. Ans: B AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: ) 'e!el: ,asy A#C$A BB: Critical Thin"ing 'e!el: (edium
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17. #f both the fixed and !ariable expenses associated with a product decrease+ what will be the effect on the contribution margin ratio and the brea"4e!en point+ respecti!elyC A; B; C; A; Contribution margin ratio Brea"4e!en point Aecrease #ncrease #ncrease Aecrease Aecrease Aecrease #ncrease #ncrease
Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 / 'e!el: (edium Source: C(A6 adapted 18. Bhich of the following is true regarding the contribution margin ratio of a single product companyC A; As fixed expenses decrease+ the contribution margin ratio increases. B; The contribution margin ratio multiplied by the selling price per unit e9uals the contribution margin per unit. C; The contribution margin ratio will decline as unit sales decline. A; The contribution margin ratio e9uals the selling price per unit less the !ariable expense ratio. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: (edium )3. #f a company is operating at the brea"4e!en point: A; its contribution margin will be e9ual to its !ariable expenses. B; its margin of safety will be e9ual to 5ero. C; its fixed expenses will be e9ual to its !ariable expenses. A; its selling price will be e9ual to its !ariable expense per unit. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: /6 2 'e!el: (edium )1. At the brea"4e!en point: A; sales would be e9ual to contribution margin. B; contribution margin would be e9ual to fixed expenses. C; contribution margin would be e9ual to net operating income. A; sales would be e9ual to fixed expenses. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium

)). The brea"4e!en point would be increased by: A; a decrease in total fixed expenses. B; a decrease in the ratio of !ariable expenses to sales. C; an increase in the contribution margin ratio. A; none of these. Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium )-. Bhich of the following strategies could be used to reduce the brea"4e!en pointC A; B; C; A; %ixed expenses Contribution margin #ncrease #ncrease Aecrease Aecrease Aecrease #ncrease #ncrease Aecrease
Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy ).. Brea"4e!en analysis assumes that: A; Total re!enue is constant. B; Dnit !ariable expense is constant. C; Dnit fixed expense is constant. A; Selling prices must fall in order to generate more re!enue. Ans: B AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy )/. Target profit analysis is used to answer which of the following 9uestionsC A; Bhat sales !olume is needed to co!er all expensesC B; Bhat sales !olume is needed to co!er fixed expensesC C; Bhat sales !olume is needed to earn a specific amount of net operating incomeC A; Bhat sales !olume is needed to a!oid a lossC Ans: C AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy
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)0. The margin of safety can be calculated by: A; Sales E :%ixed expensesFContribution margin ratio;. B; Sales E :%ixed expensesF*ariable expense per unit;. C; Sales E :%ixed expenses G *ariable expenses;. A; Sales E &et operating income. Ans: A AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: (edium )2. #f the degree of operating le!erage is .+ then a one percent change in 9uantity sold should result in a four percent change in: A; unit contribution margin. B; re!enue. C; !ariable expense. A; net operating income. Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Source: C(A6 adapted )7. Bhich of the following is the correct calculation for the degree of operating le!erageC A; net operating income di!ided by total expenses. B; net operating income di!ided by total contribution margin. C; total contribution margin di!ided by net operating income. A; !ariable expense di!ided by total contribution margin. Ans: C AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy )8. Bhich of the following is an assumption underlying standard C*$ analysisC A; #n multiproduct companies+ the sales mix is constant. B; #n manufacturing companies+ in!entories always change. C; The price of a product or ser!ice is expected to change as !olume changes. A; %ixed expenses will change as !olume increases. Ans: A AACSB: eflecti!e Thin"ing A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy

-3. @opi Corporation expects the following operating results for next year: 1.33+33 Sales........................................................... 3 1133+33 (argin of safety......................................... 3 Contribution margin ratio.......................... 2/H Aegree of operating le!erage..................... . Bhat is @opi expecting total fixed expenses to be next yearC A; 12/+333 B; 1133+333 C; 1)33+333 A; 1))/+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 16 -6 7 'e!el: @ard Solution: Current sales 4 Brea"e!en sales I (argin of safety Substituting the gi!en information into the abo!e e9uation+ we will ha!e: 1.33+333 E Brea"e!en sales I 1133+333 Brea"e!en sales I 1-33+333 Brea"e!en sales I %ixed expenses ? Contribution margin ratio Substituting the gi!en information into the abo!e e9uation+ we will ha!e: 1-33+333 I %ixed expenses ? 3.2/ %ixed expenses I 1))/+333
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-1. ,scareno Corporation has pro!ided its contribution format income statement for June. The company produces and sells a single product. Sales :7+.33 units;......................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 120.+.3 3 ../+)33 -18+)33 )/3+833 1 07+-33
#f the company sells 7+)33 units+ its total contribution margin should be closest to: A; 1-31+333 B; 1-11+033 C; 1-18+)33 A; 100+02. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Current contribution margin ? Current sales in units I Contribution margin per unit 1-18+)33 ? 7+.33 I 1-7 contribution margin per unit #f 7+)33 units are sold+ the total contribution margin will be 7+)33 K 1-7+ or 1-11+033. -). o!ins"y Corporation+ a company that produces and sells a single product+ has pro!ided its contribution format income statement for &o!ember. Sales :/+233 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1-18+)3 3 177+133 1-1+133 130+/33 1 ).+033
#f the company sells /+-33 units+ its net operating income should be closest to: A; 1).+033 B; 1)+)33 C; 1))+72. A; 11/+.33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy

Solution: Current sales dollars ? Current sales in units I Sales price per unit 1-18+)33 ? /+233 I 1/0 sales price per unit Current !ariable expenses ? Current sales in units I *ariable expense per unit 1177+133 ? /+233 I 1-- !ariable expense per unit Sales :/+-33 units K 1/0;....................... *ariable expenses :/+-33 units K 1--;.. Contribution margin.............................. %ixed expenses...................................... &et operating income............................ 1)80+733 12.+833 1)1+833 130+/33 1 1/+.33
--. Sorin #nc.+ a company that produces and sells a single product+ has pro!ided its contribution format income statement for January. Sales :.+)33 units;......................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 11//+.3 3 133+733 /.+033 .)+.33 1 1)+)33
#f the company sells .+033 units+ its total contribution margin should be closest to: A; 1/.+033 B; 1/8+733 C; 108+.33 A; 11-+-0) Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Current contribution margin ? Current sales in units I Contribution margin per unit 1/.+033 ? .+)33 I 11- contribution margin per unit #f .+033 units are sold+ the total contribution margin will be .+033 K 11-+ or 1/8+733.
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-.. Aecaprio #nc. produces and sells a single product. The company has pro!ided its contribution format income statement for June. Sales :7+733 units;.......................... *ariable expenses.......................... Contribution margin....................... %ixed expenses............................... &et operating income..................... 1/)7+33 3 )83+.33 )-2+033 )11+233 1 )/+833
#f the company sells 8+)33 units+ its net operating income should be closest to: A; 1)2+322 B; 1.8+833 C; 1-0+233 A; 1)/+833 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Current sales dollars ? Current sales in units I Sales price per unit 1/)7+333 ? 7+733 I 103 sales price per unit Current !ariable expenses ? Current sales in units I *ariable expense per unit 1)83+.33 ? 7+733 I 1-- !ariable expense per unit Sales :8+)33 units K 103 ;.......................... *ariable expenses :8+)33 units K 1--;....... Contribution margin................................... %ixed expenses........................................... &et operating income................................. 1//)+33 3 -3-+033 ).7+.33 )11+233 1 -0+233

-/. The Bronco Birdfeed Company reported the following information: Sales :.33 cases;............................ *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 1133+33 3 03+333 .3+333 -/+333 1/+333
@ow much will the sale of one additional case add to BroncoLs net operating incomeC A; 1)/3.33 B; 1133.33 C; 11/3.33 A; 11)./3 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Current contribution margin ? Current sales in cases I Contribution margin per case 1.3+333 ? .33 I 1133 contribution margin per case #f one additional case is sold+ net operating income will increase by 1133.
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-0. The margin of safety in the %laherty Company is 1).+333. #f the companyLs sales are 11)3+333 and its !ariable expenses are 173+333+ its fixed expenses must be: A; 17+333 B; 1-)+333 C; 1).+333 A; 110+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 /6 2 'e!el: @ard Solution: Current sales 4 Brea"e!en sales I (argin of safety Substituting the gi!en information into the abo!e e9uation+ we will ha!e: 11)3+333 4 Brea"e!en sales I 1).+333 Brea"e!en sales I 180+333 Sales 4 *ariable expenses I Contribution margin 11)3+333 4 173+333 I 1.3+333 Contribution margin ratio I Contribution margin ? Sales Contribution margin ratio I 1 .3+333 ? 11)3+333 Contribution margin ratio I 3.----Brea"e!en sales I %ixed costs ? Contribution margin ratio Substituting the gi!en information into the abo!e e9uation+ we will ha!e: 180+333 I %ixed costs ? 3.----%ixed costs I 1-)+333

-2. Aodero Company produces a single product which sells for 1133 per unit. %ixed expenses total 11)+333 per month+ and !ariable expenses are 103 per unit. The companyLs sales a!erage /33 units per month. Bhich of the following statements is correctC A; The companyLs brea"4e!en point is 11)+333 per month. B; The fixed expenses remain constant at 1). per unit for any acti!ity le!el within the rele!ant range. C; The companyLs contribution margin ratio is .3H. A; esponses A+ B+ and C are all correct. Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 / 'e!el: (edium Solution: Answer A is not correct because: Sales I *ariable expenses G %ixed expenses G $rofit 1133< I 103< G 11)+333 G 13 1.3< I 11)+333 < I 11)+333 ? 1.3 per unit I -33 units -33 units K 1133 selling price per unit I 1-3+333 brea"e!en sales in dollars Answer B is not correct because fixed costs change as acti!ity le!el changes Answer C is correct because: Contribution margin per unit I Selling price per unit 4 *ariable expenses per unit I 1133 4 103 I 1.3 Contribution margin ratio I Contribution margin per unit ? Selling price per unit Contribution margin ratio I 1.3 ? 1133 Contribution margin ratio I .3H
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-7. @olt CompanyLs !ariable expenses are 23H of sales. At a 1-33+333 sales le!el+ the degree of operating le!erage is 13. #f sales increase by 103+333+ the degree of operating le!erage will be: A; 1) B; 13 C; 0 A; . Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 7 'e!el: @ard Solution: Sales.......................................................... *ariable expenses :1-33+333 K 23H;....... Contribution margin................................. %ixed expenses.......................................... &et operating income............................... 1-33+33 3 )13+333 83+333 C 1 C
Current degree of operating le!erage I Current contribution margin ? Current net operating income 13 I 183+333 ? Current net operating income Current net operating income I 183+333 ? 13 I 18+333 Contribution margin I %ixed expenses 4 &et operating income 183+333 I %ixed expenses 4 18+333 %ixed expenses I 183+333 4 18+333 I 171+333 Sales :1-33+333 G 103+333;...................... *ariable expenses :1-03+333 K 23H;....... Contribution margin................................. %ixed expenses.......................................... &et operating income............................... 1-03+33 3 )/)+333 137+333 71+333 1 )2+333
Aegree of operating le!erage I Contribution margin ? &et operating income I 1137+333F1)2+333 I ..3

-8. Mayne CorporationLs contribution margin ratio is 1)H and its fixed monthly expenses are 17.+333. #f the companyLs sales for a month are 12-7+333+ what is the best estimate of the companyLs net operating incomeC Assume that the fixed monthly expenses do not change. A; 1/0/+..3 B; 10/.+333 C; 177+/03 A; 1.+/03 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Sales.......................................................... *ariable expenses :12-7+333 K 77H;....... Contribution margin :12-7+333 K 1)H;... %ixed expenses.......................................... &et operating income............................... 12-7+33 3 0.8+..3 77+/03 7.+333 1 .+/03
.3. Jil" #nc.Ls contribution margin ratio is /7H and its fixed monthly expenses are 1-0+333. Assuming that the fixed monthly expenses do not change+ what is the best estimate of the companyLs net operating income in a month when sales are 113-+333C A; 1)-+2.3 B; 1/8+2.3 C; 102+333 A; 12+)03 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Sales........................................................... *ariable expenses :113-+333 K .)H;........ Contribution margin :113-+333 K /7H;.... %ixed expenses........................................... &et operating income................................. 113-+33 3 .-+)03 /8+2.3 -0+333 1 )-+2.3
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.1. Creswell CorporationLs fixed monthly expenses are 1)8+333 and its contribution margin ratio is /0H. Assuming that the fixed monthly expenses do not change+ what is the best estimate of the companyLs net operating income in a month when sales are 18/+333C A; 11)+733 B; 1).+)33 C; 1/-+)33 A; 100+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Sales........................................................... *ariable expenses :18/+333 K ..H;.......... Contribution margin :18/+333 K /0H;....... %ixed expenses........................................... &et operating income................................. 18/+333 .1+733 /-+)33 )8+333 1).+)33
.). Bilson Company prepared the following preliminary budget assuming no ad!ertising expenditures: Selling price....................... Dnit sales........................... *ariable expenses.............. %ixed expenses................... 113 per unit 133+333 1033+333 1-33+333
Based on a mar"et study+ the company estimated that it could increase the unit selling price by 1/H and increase the unit sales !olume by 13H if 1133+333 were spent on ad!ertising. Assuming that these changes are incorporated in its budget+ what should be the budgeted net operating incomeC A; 112/+333 B; 1183+333 C; 1)3/+333 A; 1-0/+333 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Source: C$A6 adapted

Solution: Sales :113+333 units K 111./3;..................... *ariable expenses :113+333 units K 10N;..... Contribution margin..................................... %ixed expenses :1-33+333 G 1133+333;........ &et operating income.................................... 11+)0/+333 003+333 03/+333 .33+333 1 )3/+333
N Current !ariable expenses ? Current sales in units I *ariable expense per unit 1033+333 ? 133+333 I 10 !ariable expense per unit .-. Aata concerning Oardas CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 11.3 )7 111) $ercent of Sales 133H )3H 73H
The company is currently selling 7+333 units per month. %ixed expenses are 1218+333 per month. The mar"eting manager belie!es that a 1)3+333 increase in the monthly ad!ertising budget would result in a 173 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1103 B; increase of 1)3+103 C; decrease of 1)3+333 A; increase of 1103 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :7+333 units+ 7+173 units K 11.3;.......... *ariable expenses :11+1)3+333+ 11+1./+)33 K )3H;................ Contribution margin....................................... %ixed expenses................................................ &et operating income..................................... 7+333 units 11+1)3+333 )).+333 780+333 218+333 1 122+333 7+173 units 11+1./+)33 ))8+3.3 810+103 2-8+333 1 122+103
#ncrease in net operating income: 1122+103 4 1122+333 I 1103
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... Ou5io Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit $ercent of Sales Selling price....................... 11-3 133H *ariable expenses.............. 27 03H Contribution margin.......... 1 /) .3H The company is currently selling 0+333 units per month. %ixed expenses are 1)0-+333 per month. The mar"eting manager belie!es that a 1/+333 increase in the monthly ad!ertising budget would result in a 1.3 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1)+)73 B; increase of 12+)73 C; decrease of 1/+333 A; decrease of 1)+)73 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :0+333 units+ 0+1.3 units K 11-3;......... *ariable expenses :1273+333+ 1287+)33 K 03H;..................... Contribution margin...................................... %ixed expenses.............................................. &et operating income.................................... 0+333 units 1273+333 .07+333 -1)+333 )0-+333 1 .8+333 0+1.3 units 1287+)33 .27+8)3 -18+)73 )07+333 1 /1+)73
#ncrease in net operating income: 1/1+)73 4 1.8+333 I 1)+)73

./. Aata concerning Aora5io CorporationLs single product appear below: Selling price................................... *ariable expenses.......................... Contribution margin...................... $er Dnit 1103 .7 111) $ercent of Sales 133H -3H 23H
%ixed expenses are 172+333 per month. The company is currently selling 1+333 units per month. (anagement is considering using a new component that would increase the unit !ariable cost by 1)7. Since the new component would increase the features of the companyLs product+ the mar"eting manager predicts that monthly sales would increase by .33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1/+033 B; increase of 1--+033 C; decrease of 1/+033 A; decrease of 1--+033 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :1+333 units+ 1+.33 units K 1103;.............. *ariable expenses :1+333 units K 1.7+ 1+.33 units K 120;............ Contribution margin........................................... %ixed expenses.................................................... &et operating income.......................................... 1+333 units 1103+333 .7+333 11)+333 72+333 1 )/+333 1+.33 units 1)).+333 130+.33 112+033 72+333 1 -3+033
#ncrease in net operating income: 1-3+033 4 1)/+333 I 1/+033
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.0. Cho!anec Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 1123 *ariable expenses.............. 07 Contribution margin.......... 113) $ercent of Sales 133H .3H 03H
%ixed expenses are 1/)1+333 per month. The company is currently selling 2+333 units per month. (anagement is considering using a new component that would increase the unit !ariable cost by 10. Since the new component would increase the features of the companyLs product+ the mar"eting manager predicts that monthly sales would increase by /33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1.7+333 B; decrease of 10+333 C; increase of 1.7+333 A; increase of 10+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :2+333 units+ 2+/33 units K 1123;............ *ariable expenses :2+333 units K 107+ 2+/33 units K 12.;......... Contribution margin......................................... %ixed expenses................................................. &et operating income....................................... 2+333 units 11+183+333 .20+333 21.+333 /)1+333 1 18-+333 2+/33 units 11+)2/+333 ///+333 2)3+333 /)1+333 1 188+333
#ncrease in net operating income: 1188+333 4 118-+333 I 10+333

.2. Aata concerning $ellegren CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 1)33 .3 1103 $ercent of Sales 133H )3H 73H
%ixed expenses are 1/-1+333 per month. The company is currently selling .+333 units per month. The mar"eting manager would li"e to cut the selling price by 11. and increase the ad!ertising budget by 1-/+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by /33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 117+333 B; increase of 1-7+333 C; decrease of 1-7+333 A; increase of 1/7+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :.+333 units K 1)33+ .+/33 units K 1170;. *ariable expenses :.+333 units K 1.3+ .+/33 units K 1.3;........... Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ .+333 units 1733+333 103+333 0.3+333 /-1+333 1138+333 .+/33 units 17-2+333 173+333 0/2+333 /00+333 1 81+333
Aecrease in net operating income: 1138+333 4 181+333 I 117+333
6-"7
.7. Cobble Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit $ercent of Sales Selling price....................... 1103 133H *ariable expenses.............. .7 -3H Contribution margin.......... 111) 23H %ixed expenses are 1.88+333 per month. The company is currently selling /+333 units per month. The mar"eting manager would li"e to cut the selling price by 11- and increase the ad!ertising budget by 1--+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by 833 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1/0+133 B; decrease of 17+833 C; increase of 188+-33 A; decrease of 1/0+133 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :/+333 units K 1103+ /+833 units K 11.2;. . *ariable expenses :/+333 units K 1.7+ /+833 units K 1.7;............ Contribution margin........................................... %ixed expenses.................................................... &et operating income.......................................... /+333 units 1733+333 ).3+333 /03+333 .88+333 1 01+333 /+833 units 1702+-33 )7-+)33 /7.+133 /-)+333 1 /)+133
Aecrease in net operating income: 101+333 4 1/)+133 I 17+833

.8. Aata concerning Ba5in CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 1133 )3 1 73 $ercent of Sales 133H )3H 73H
%ixed expenses are 1-7.+333 per month. The company is currently selling 0+333 units per month. The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 18 per unit. #n exchange+ the sales staff would accept a decrease in their salaries of 1.0+333 per month. :This is the companyLs sa!ings for the entire sales staff.; The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by /33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1)2+/33 B; decrease of 10.+/33 C; increase of 1.1+/33 A; increase of 1/32+/33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :0+333 units K 1133+ 0+/33 units K 1133;. . *ariable expenses :0+333 units K 1)3+ 0+/33 units K 1)8;............ Contribution margin............................................ %ixed expenses.................................................... &et operating income.......................................... 0+333 units 1033+333 1)3+333 .73+333 -7.+333 1 80+333 0+/33 units 10/3+333 177+/33 .01+/33 --7+333 11)-+/33
#ncrease in net operating income: 11)-+/33 4 180+333 I 1)2+/33
6-"9
/3. Sannella Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 1))3 *ariable expenses.............. 00 Contribution margin.......... 11/. $ercent of Sales 133H -3H 23H
%ixed expenses are 1881+333 per month. The company is currently selling 7+333 units per month. The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 111 per unit. #n exchange+ the sales staff would accept a decrease in their salaries of 12.+333 per month. :This is the companyLs sa!ings for the entire sales staff.; The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by )33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 11+).0+033 B; increase of 11.+033 C; decrease of 11--+.33 A; increase of 121+733 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :7+333 units K 1))3+ 7+)33 units K 1))3;.... *ariable expenses :7+333 units K 100+ 7+)33 units K 122;............. Contribution margin............................................. %ixed expenses..................................................... &et operating income........................................... 7+333 units 11+203+333 /)7+333 1+)-)+333 881+333 1 ).1+333 7+)33 units 11+73.+333 0-1+.33 1+12)+033 812+333 1 )//+033
#ncrease in net operating income: 1)//+033 4 1).1+333 I 11.+033

/1. Cherry Street (ar"et reported the following information for the sales of their only product+ cherries sold by the pint: Total $er Dnit 1-1+/3 3 1../3 8+./ 3 1.-/ ))+3/3 1-.1/ 1-+33 3 1 8+3/ 3
Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income.........
Cherry Street would li"e to increase their selling price by /3 cents per unit+ and feel that this will decrease sales !olume by 13H. Should Cherry Street increase the price+ and what will the effect be on net operating incomeC A; Pes6 1-+/33 increase B; Pes6 18./ increase C; &o6 no change A; &o6 18./ decrease Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Current sales :dollars; I Current per unit price K Current sales :units; 1-1+/33 I 1../3 K Current sales :units; 2+333 I Current sales :units; Sales :2+333 units K 1../3+ 0+-33 units K 1/.33;. . . *ariable expenses :2+333 units K 11.-/+ 0+-33 units K 11.-/;......... Contribution margin............................................... %ixed expenses....................................................... &et operating income............................................. 2+333 units 1-1+/33 8+./3 ))+3/3 1-+333 1 8+3/3 0+-33 units 1-1+/33 7+/3/ ))+88/ 1-+333 1 8+88/
#ncrease in net operating income: 18+88/ 4 18+3/3 I 18./
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/). A company ma"es a single product that it sells for 110 per unit. %ixed costs are 120+733 per month and the product has a contribution margin ratio of .3H. #f the companyLs actual sales are 1)).+333+ its margin of safety is: A; 1-)+333 B; 180+333 C; 11)7+333 A; 118)+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: /6 2 'e!el: (edium Source: C#(A6 adapted Solution: Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 120+733F3..33 I 118)+333 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 1)).+333 4 118)+333 I 1-)+333 /-. The following data are a!ailable for the $helps Company for a recent month: $roduct A Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... 11/3+333 81+333 1 /8+333 $roduct B $roduct C 11-3+333 13.+333 1 )0+333 183+333 )2+333 10-+333 Total 1-23+33 3 )))+333 1.7+333 //+333 1 8-+333
The brea"4e!en sales for the month for the company are: A; 181+002 B; 1)3-+333 C; 11.7+333 A; 11-2+/33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: /6 8 'e!el: (edium

Solution: $roduct A Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... 11/3+333 81+333 1 /8+333 $roduct B $roduct C 11-3+333 13.+333 1 )0+333 183+333 )2+333 10-+333 Total 1-23+33 3 )))+333 1.7+333 //+333 1 8-+333
O!erall C( ratio I Total contribution marginFTotal sales I 11.7+333F1-23+333 I 3..3 Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1//+333F3..3 I 11-2+/33 /.. @artl Corporation is a single product firm with the following selling price and cost structure for next year: Selling price per unit.................................. Contribution margin ratio.......................... Total fixed expenses for the year............... 11.73 .3H 1)17+23 3
@ow many units will @artl ha!e to sell next year in order to brea"4e!enC A; 1)1+/33 B; )3)+/33 C; -3-+2/3 A; /.0+2/3 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium Solution: *ariable cost per unit I 11.73 K :1 4 .3H; *ariable cost per unit I 11.37 Sales I *ariable expenses G %ixed expenses G $rofit 11.73< I 11.37< G 1)17+233 G 13 13.2)< I 1)17+233 < I 1)17+233 ? 13.2) per unit I -3-+2/3 units
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//. Borich Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 11/3.33 12-./3 1-37+)8 /
The brea"4e!en in monthly unit sales is closest to: A; )+3// B; .+3-3 C; .+18. A; -+.)0 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 11/3.33< I 12-./3< G 1-37+)8/ G 13 120./3< I 1-37+)8/ < I 1-37+)8/ ? 120./3 per unit I .+3-3 units /0. Aata concerning Buchenau CorporationLs single product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 11/3.33 1-../3 1.00+0) 3
The brea"4e!en in monthly unit sales is closest to: A; -+111 B; 0+78) C; .+3.3 A; 1-+/)/ Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 11/3.33< I 1-../3< G 1.00+0)3 G 13

111/./3< I 1.00+0)3 < I 1.00+0)3 ? 111/./3 per unit I .+3.3 units
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/2. @e!esy #nc. produces and sells a single product. The selling price of the product is 1)33.33 per unit and its !ariable cost is 173.33 per unit. The fixed expense is 1-33+333 per month. The brea"4e!en in monthly unit sales is closest to: A; )+/33 B; 1+/33 C; -+2/3 A; )+/7Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1)33.33< I 173.33< G 1-33+333 G 13 11)3.33< I 1-33+333 < I 1-33+333 ? 11)3.33 per unit I )+/33 units /7. Benstrom Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 11-3.33 1.1.03 1138+01 0
The brea"4e!en in monthly dollar sales is closest to: A; 1-.)+//3 B; 1)3.+.// C; 1138+010 A; 1101+)33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 11-3.33< I 1.1.03< G 1138+010 G 13 177..3< I 1138+010 < I 1138+010 ? 177..3 per unit I 1+).3 units 1+).3 units K 11-3.33 selling price I 1101+)33

/8. Aata concerning %ollic" CorporationLs single product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1113.33 1-3.73 1-)1+// )
The brea"4e!en in monthly dollar sales is closest to: A; 11+1.7+.33 B; 10-7+7/1 C; 1-)1+//) A; 1..0+033 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1113.33< I 1-3.73< G 1-)1+//) G 13 128.)3< I 1-)1+//) < I 1-)1+//) ? 128.)3 per unit I .+303 units .+303 units K 1113.33 selling price I 1..0+033 03. Bimpy #nc. produces and sells a single product. The selling price of the product is 11/3.33 per unit and its !ariable cost is 1/7./3 per unit. The fixed expense is 1-00+81/ per month. The brea"4e!en in monthly dollar sales is closest to: A; 1031+/33 B; 1-00+81/ C; 10-0+.37 A; 18.3+737 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy
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Solution: Sales I *ariable expenses G %ixed expenses G $rofit 11/3.33< I 1/7./3< G 1-00+81/ G 13 181./3< I 1-00+81/ < I 1-00+81/ ? 181./3 per unit I .+313 units .+313 units K 11/3.33 selling price I 1031+/33 01. The Saginaw #ce Company had sales of 1.33+333+ with !ariable expenses of 110)+333 and fixed expenses of 187+333. Bhich of the following is closest to SaginawLs brea"4 e!en pointC A; 1)03+333 B; 110/+333 C; 11.3+333 A; 1)-7+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales.......................................................... *ariable expenses...................................... Contribution margin and contribution margin ratio........................................... Total 1.33+333 10)+333 1 )-7+333 $ercent of Sales 133.3H .3./H /8./H
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 187+333F3./8/ I 110.+23/.77

0). $roduct P sells for 11/ per unit+ and has related !ariable expenses of 18 per unit. %ixed expenses total 1-33+333 per year. @ow many units of $roduct P must be sold each year to yield an annual profit of 183+333: A; /3+333 units B; 0/+333 units C; 1/+333 units A; .-+--- units Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 11/< I 18< G 1-33+333 G 183+333 10< I 1-83+333 < I 1-83+333 ? 10 per unit I 0/+333 units 0-. Caneer Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1).3.33 171.03 1882+8) 3
The unit sales to attain the companyLs monthly target profit of 1..+333 is closest to: A; 2+780 B; 1)+208 C; 0+/27 A; .+-.1 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 1).3.33< I 171.03< G 1882+8)3 G 1..+333 11/7..3< I 11+3.1+8)3 < I 11+3.1+8)3 ? 11/7..3 per unit I 0+/27 units :rounded;
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0.. Aata concerning Bedwell ,nterprises CorporationLs single product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1103.33 10/.03 1-72+3. 3
The unit sales to attain the companyLs monthly target profit of 112+333 is closest to: A; 0+1/8 B; .+)73 C; )+/)/ A; .+-)1 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 1103.33< I 10/.03< G 1-72+3.3 G 112+333 18...3< I 1.3.+3.3 < I 1.3.+3.3 ? 18...3 per unit I .+)73 units :rounded; 0/. @ettric" #nternational CorporationLs only product sells for 11)3.33 per unit and its !ariable expense is 1/).73. The companyLs monthly fixed expense is 1-80+.73 per month. The unit sales to attain the companyLs monthly target profit of 11-+333 is closest to: A; 2+2// B; 0+38C; /+2/A; -+.1) Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 11)3.33< I 1/).73< G 1-80+.73 G 11-+333 102.)3< I 1.38+.73 < I 1.38+.73 ? 102.)3 per unit I 0+38- units :rounded;

00. 'ogsdon Corporation produces and sells a single product whose contribution margin ratio is 0-H. The companyLs monthly fixed expense is 12)3+2)3 and the companyLs monthly target profit is 1)7+333. The dollar sales to attain that target profit is closest to: A; 1.21+08. B; 1./.+3/. C; 11+177+... A; 11+1..+333 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :12)3+2)3 G 1)7+333;F3.0- I 11+177+... :rounded; 02. The contribution margin ratio of (ountain CorporationLs only product is /)H. The companyLs monthly fixed expense is 1)80+.33 and the companyLs monthly target profit is 12+333. The dollar sales to attain that target profit is closest to: A; 1/23+333 B; 11/2+207 C; 1/7-+.0) A; 11/.+1)7 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1)80+.33 G 12+333;F3./) I 1/7-+.0) :rounded;
6-#1
07. (aQid Corporation sells a product for 1).3 per unit. The productLs current sales are .1+-33 units and its brea"4e!en sales are -0+2/2 units. Bhat is the margin of safety in dollarsC A; 17+7)1+073 B; 10+037+333 C; 18+81)+333 A; 11+383+-)3 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1).3 per unit K -0+2/2 I 17+7)1+073 Current sales I 1).3 per unit K .1+-33 I 18+81)+333 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 18+81)+333 4 17+7)1+073 I 11+383+-)3 08. (cmurtry Corporation sells a product for 1123 per unit. The productLs current sales are 13+333 units and its brea"4e!en sales are 7+133 units. The margin of safety as a percentage of sales is closest to: A; )-H B; 71H C; 18H A; 22H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1123 per unit K 7+133 I 11+-22+333 Current sales I 1123 per unit K 13+333 I 11+233+333 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 11+233+333 4 11+-22+333 I 1-)-+333 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 1-)-+333 ? 11+233+333 I 18H

23. Cubie Corporation has pro!ided the following data concerning its only product: Selling price....................... 1133 per unit Current sales...................... 13+033 units Brea"4e!en sales................ 8+/.3 units Bhat is the margin of safety in dollarsC A; 11+303+333 B; 1130+333 C; 18/.+333 A; 1230+002 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1133 per unit K 8+/.3 I 18/.+333 Current sales I 1133 per unit K 13+033 I 11+303+333 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 11+303+333 4 18/.+333 I 1130+333
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21. ,nsley Corporation has pro!ided the following data concerning its only product: Selling price....................... 1)33 per unit Current sales...................... -3+-33 units Brea"4e!en sales................ )1+710 units The margin of safety as a percentage of sales is closest to: A; 01H B; )7H C; 2)H A; -8H Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1)33 per unit K -3+-33 I 10+303+333 Current sales I 1)33 per unit K )1+710 I 1.+-0-+)33 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 10+303+333 4 1.+-0-+)33 I 11+080+733 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 11+080+733 ? 1.+-0-+)33 I -8H :rounded; 2). The following is &oble CompanyLs contribution format income statement last month: Sales :1)+333 units;........... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1033+33 3 -2/+333 ))/+333 1/3+333 1 2/+333
Bhat is the companyLs margin of safety percentage to the nearest whole percentC A; .)H B; -7H C; --H A; )/H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: (edium

Solution: Sales I Sales price K Dnits sold 1033+333 I 1)+333 K Sales price 1/3 I Sales price *ariable expenses I $er4unit cost K Dnits sold 1-2/+333 I 1)+333 K $er4unit cost 1-1.)/ I $er4unit cost Brea"4e!en sales: Sales I *ariable expenses G %ixed expenses G $rofit 1/3.33< I 1-1.)/< G 11/3+333 G 13 117.2/< I 11/3+333 < I 7+333 units (argin of safety in dollars: Brea"4e!en sales I 1/3 per unit K 7+333 I 1.33+333 Current sales I 1/3 per unit K 1)+333 I 1033+333 (argin of safety in dollars I Sales 4 Brea"4e!en sales I 1033+333 4 1.33+333 I 1)33+333 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 1)33+333 ? 1033+333 I --H :rounded; 2-. Ostler CompanyLs net operating income last year was 113+333 and its contribution margin was 1/3+333. Dsing the operating le!erage concept+ if the companyLs sales increase next year by 7 percent+ net operating income can be expected to increase by: A; )3H B; 10H C; 103H A; .3H Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution margin ? &et operating income Aegree of operating le!erage I 1/3+333 ? 113+333 I / $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 7H K / I .3H
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2.. The %ebruary contribution format income statement of (cabier Corporation appears below: a. Aegree of operating le!erage I Contribution marginF&et operating income I 1)/1+133F1.1+-33 I 0.37 b. $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 18H K 0.37 I 11/./)H Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1)11+)3 3 80+333 11/+)33 7.+133 1 -1+133
The degree of operating le!erage is closest to: A; 3.)2 B; 0.28 C; -.23 A; 3.1/ Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 111/+)33F1-1+133 I -.23

2/. Serfass CorporationLs contribution format income statement for July appears below: Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1)03+33 3 120+333 7.+333 21+733 1 1)+)33
The degree of operating le!erage is closest to: A; 3.3/ B; 3.1/ C; )1.-1 A; 0.78 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 17.+333F11)+)33 I 0.78 20. ushenberg CorporationLs operating le!erage is 13.7. #f the companyLs sales increase by 1.H+ its net operating income should increase by about: A; 1/1.)H B; 1..3H C; 22.1H A; 13.7H Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 1.H K 13.7 I 1/1.)H
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22. Bendel #nc. has an operating le!erage of 2.-. #f the companyLs sales increase by -H+ its net operating income should increase by about: A; ).-.-H B; 2.-H C; )1.8H A; -.3H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I -H K 2.- I )1.8H 27. ,.A. (anufacturing+ #nc. produces and sells ice s"ates. The current net operating income is 1.3+333+ with a degree of operating le!erage of -. #f sales increase by 13H+ how much total net operating income should be expectedC A; 11).333 B; 1/)+333 C; 1..+333 A; &one of the abo!e. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 13H K - I -3H Current net operating income K $ercent increase I #ncrease in net operating income 1.3+333 K -3H I 11)+333 #ncrease in net operating income Current net operating income G #ncrease in net operating income I ,xpected net operating income I 1.3+333 G 11)+333 I 1/)+333

28. (cdale #nc. produces and sells two products. Aata concerning those products for the most recent month appear below: $roduct #.8* 11/+333 1-+-33 $roduct R/3D 11.+333 1)+283
Sales................................... *ariable expenses..............
The fixed expenses of the entire company were 117+.03. The brea"4e!en point for the entire company is closest to: A; 1)-+-02 B; 113+/.3 C; 1).+//3 A; 117+.03 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy Solution: (ulti BF, Solution: Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... $roduct #.8* $roduct R/3D 11/+333 11.+333 -+-33 )+283 111+233 111+)13 Total 1)8+333 0+383 ))+813 17+.03 1 .+./3
O!erall C( ratio I Total contribution marginFTotal sales I 1))+813F1)8+333 I 3.28 Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 117+.03F3.28 I 1)-+-02 :rounded;
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73.
oddam Corporation produces and sells two products. Aata concerning those products for the most recent month appear below: $roduct O38, 1)7+333 111+)33 $roduct M12B 1-7+333 17+033
Sales................................... *ariable expenses..............
The fixed expenses of the entire company were 1.1+823. #f the sales mix were to shift toward $roduct O38, with total sales remaining constant+ the o!erall brea"4e!en point for the entire company: A; would increase. B; could increase or decrease. C; would not change. A; would decrease. Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy 71. &ewham Corporation produces and sells two products. #n the most recent month+ $roduct 13' had sales of 1)7+333 and !ariable expenses of 10+..3. $roduct S80& had sales of 1))+333 and !ariable expenses of 12+/03. And the fixed expenses of the entire company were 1-)+213. The brea"4e!en point for the entire company is closest to: A; 1-)+213 B; 1./+.-1 C; 1.0+213 A; 112+)83 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy

Solution: (ulti BF, Solution: Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... $roduct 13' 1)7+333 0+..3 1)1+/03 $roduct S80& 1))+333 2+/03 11.+..3 Total 1/3+333 1.+333 -0+333 -)+213 1 -+)83
O!erall C( ratio I Total contribution marginFTotal sales I 1-0+333F1/3+333 I 3.2) Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1-)+213F3.2) I 1./+.-1 :rounded; 7). %lesch Corporation produces and sells two products. #n the most recent month+ $roduct C83B had sales of 1).+333 and !ariable expenses of 10+.73. $roduct P./, had sales of 1)8+333 and !ariable expenses of 111+313. And the fixed expenses of the entire company were 1-)+)73. #f the sales mix were to shift toward $roduct C83B with total sales remaining constant+ the o!erall brea"4e!en point for the entire company: A; would decrease. B; would increase. C; could increase or decrease. A; would not change. Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy
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7-. RacharyLs Bi"e Shop sells two products. Sales and contribution margin ratios for the two products follow: $roduct A 113+333 )/H $roduct B 1.3+333 2/H
Sales in dollars............................... Contribution margin ratio..............
Mi!en these data+ the contribution margin ratio for the company as a whole would be: A; )/H B; /3H C; 0/H A; #t is impossible to determine from the gi!en data. Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: (edium Solution: (ulti BF, Solution: Sales.......................................................... Contribution margin :Sales K C( ratio;. . $roduct A 113+333 1)+/33 $roduct B 1.3+333 1-3+333 Total 1/3+333 1-)+/33
O!erall C( ratio I Total contribution marginFTotal sales I 1-)+/33F1/3+333 I 3.0/ Dse the following to answer 9uestions 7.470: A cement manufacturer has supplied the following data: Tons of cement produced and sold........................ Sales re!enue......................................................... *ariable manufacturing expense........................... %ixed manufacturing expense................................ *ariable selling and administrati!e expense......... %ixed selling and administrati!e expense.............. &et operating income............................................. 073+333 1)+277+33 3 11+1/0+33 3 1203+333 1)2)+333 1)8.+333 1-30+333

7.. Bhat is the companyLs unit contribution marginC A; 13../ B; 1).13 C; 1).33 A; 1..13 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Contribution margin I Sales 4 *ariable expenses Contribution margin I 1)+277+333 4 :11+1/0+333 G 1)2)+333; Contribution margin I 11+-03+333 Dnit contribution margin I Contribution margin ? Tons of cement Dnit contribution margin I 11+-03+333 ? 073+333 Dnit contribution margin I 1).33 7/. The companyLs contribution margin ratio is closest to: A; -8.3H B; /1.)H C; 11.3H A; .7.7H Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Contribution margin I Sales 4 *ariable expenses Contribution margin I 1)+277+333 4 :11+1/0+333 G 1)2)+333; Contribution margin I 11+-03+333 Contribution margin ratio I Contribution margin ? Sales Contribution margin ratio I 11+-03+333 ? 1)+277+333 Contribution margin ratio I .7.7H
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70. #f the company increases its unit sales !olume by .H without increasing its fixed expenses+ then total net operating income should be closest to: A; 11)+).3 B; 1-17+).3 C; 1-03+.33 A; 1-11+82Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: (edium Solution: &ew contribution margin :11+-03+333 K 1.3.;........... %ixed expenses :1203+333 G 1)8.+333;...................... &et operating income................................................. Dse the following to answer 9uestions 72478: ighway Corporation has supplied the following data: Sales per period............................. Selling price................................... *ariable manufacturing cost.......... Selling expenses............................ Administration expenses................ 1+333 units 1/3 per unit 1)3 per unit 113+333 plus /H of sales 1/+333 plus 1/H of sales 11+.1.+.33 1+3/.+333 1 -03+.33
72. The total contribution margin per period is: A; 1))+/33 B; 1)2+/33 C; 1-3+333 A; 1)3+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: (edium

Solution: Sales :1+333 units K 1/3;............... *ariable expensesN........................ Contribution margin....................... 1/3+333 -3+333 1)3+333 1)3+333 )+/33 2+/33 1-3+333
N *ariable manufacturing cost :1+333 units K 1)3;........... Selling expenses :1/3+333 K /H;.................................... Administration expenses :1/3+333 K 1/H;..................... Total !ariable expenses................................................... 77. The brea"4e!en point per period is :round to nearest unit;: A; 2/3 units B; /./ units C; /33 units A; 002 units
Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1/3< I 1-3<N G 11/+333 G 13 1)3< I 11/+333 < I 11/+333 ? 1)3 per unit I 2/3 units N*ariable expense per unit I 1)3 G :/H K 1/3; G :1/H K 1/3; I 1-3
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78. #f the selling price is changed to 1// per unit+ the brea"4e!en point will be :round to nearest unit;: A; 002 units B; /./ units C; 0)/ units A; /33 units Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: .6 / 'e!el: (edium Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1//< I 1-1<N G 11/+333 G 13 1).< I 11/+333 < I 11/+333 ? 1). per unit I 0)/ units N*ariable expense per unit I 1)3 G :/H K 1//; G :1/H K 1//; I 1-1 Dse the following to answer 9uestions 8348): Bis"ra Corporation is a single product firm that expects the following operating results next year: #n Total $er Dnit 1)77+33 3 13.73 112)+73 3 13..7 12)+333 13.)3
Sales................................. *ariable expenses............. %ixed expenses.................
83. ,!ery unit that Bis"ra sells next year after the brea"4e!en point will increase net operating income by: A; 13.1) B; 13.)3 C; 13.-) A; 13.03 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 16 / 'e!el: ,asy Solution: Sales per unit 4 *ariable expenses per unit I Contribution margin per unit

I 13.73 4 13..7 I 13.-)
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81. Bhat would Bis"raLs total sales dollars ha!e to be next year to generate 1173+333 of net operating incomeC A; 1./3+333 B; 10-3+333 C; 1/77+333 A; 1272+/33 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: C( ratio I :Sales 4 *ariable expenses; ? Sales I :1)77+333 4 112)+733; ? 1)77+333 I .3H Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :12)+333 G 1173+333;F3..3 I 10-3+333 8). Bhat is Bis"raLs margin of safety percentageC A; 1/H B; ).H C; -2./H A; .3H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: Brea"4e!en sales: Sales I *ariable expenses G %ixed expenses G $rofit 13.73< I 13..7<N G 12)+333 G 13 13.-)< I 12)+333 < I 12)+333 ? 13.-) per unit I ))/+333 units (argin of safety in dollars: Brea"4e!en sales I 13.73 per unit K -03+333 I 1)77+333 Current sales I 13.73 per unit K ))/+333 I 1173+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1)77+333 E 1173+333 I 1137+333 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 1137+333 ? 1)77+333 I -2./H

Dse the following to answer 9uestions 8-48/: A manufacturer of premium wire strippers has supplied the following data: Dnits produced and sold........................................ Sales re!enue......................................................... *ariable manufacturing expense........................... %ixed manufacturing expense................................ *ariable selling and administrati!e expense......... %ixed selling and administrati!e expense.............. &et operating income............................................. /73+333 1.+120+33 3 1)+721+33 3 1227+333 1-.7+333 113.+333 12/+333
8-. The companyLs margin of safety in units is closest to: A; )-.+))) B; /0.+).) C; ./+.// A; ./2+/33 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: (edium Solution: Brea"4e!en sales in units: Sales I *ariable expenses G %ixed expenses G $rofit 12.)3<N I 1/.//<NN G 177)+333 G 13 11.0/< I 177)+333 < I 177)+333 ? 11.0/ per unit I /-.+/./ units (argin of safety in units: (argin of safety in units I Sales in units E Brea"4e!en sales in units I /73+333 E /-.+/./ I ./+.// units N NN 1.+120+333 ? /73+333 units I 12.)3 per unit (anufacturing expense :1)+721+333 ? /73+333 units;................. Selling and administrati!e expense :1-.7+333 ? /73+333 units;.. Total !ariable expenses per unit................................................... 1..8/ 3.03 1/.//
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8.. The companyLs unit contribution margin is closest to: A; 1).)/ B; 1/.// C; 11.0/ A; 10.03 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales................................... *ariable expenses.............. Contribution margin........... 18/2+333 ? /73+333 units I 11.0/ 8/. The companyLs degree of operating le!erage is closest to: A; //.07 B; -.0/ C; 2.2A; 1).20 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: (edium Solution: Sales................................... 1.+120+333 *ariable expenses.............. -+)18+333 Contribution margin........... 1 8/2+333 Aegree of operating le!erage I Contribution marginF&et operating income I 18/2+333F12/+333 I 1).20 1.+120+333 -+)18+333 1 8/2+333

Dse the following to answer 9uestions 80482: Oeomuangtai Corporation produces and sells a single product. The company has pro!ided its contribution format income statement for October. Sales :.+033 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1)00+73 3 128+.33 72+.33 0)+)33 1 )/+)33
80. #f the company sells .+/33 units+ its total contribution margin should be closest to: A; 17/+/33 B; 1).+0/) C; 172+.33 A; 171+033 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales price per unit I 1)00+733 ? .+033 units I 1/7 *ariable expense per unit I 1128+.33 ? .+033 units I 1-8 1)01+33 Sales :.+/33 units;............. 3 *ariable expenses.............. 12/+/33 Contribution margin.......... 1 7/+/33
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82. #f the company sells .+)33 units+ its net operating income should be closest to: A; 112+033 B; 1)-+338 C; 1)/+)33 A; 1)+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales price per unit I 1)00+733 ? .+033 units I 1/7 *ariable expense per unit I 1128+.33 ? .+033 units I 1-8 1).-+03 Sales :.+)33 units;............. 3 *ariable expenses.............. 10-+733 Contribution margin.......... 28+733 %ixed expenses................... 0)+)33 &et operating income......... 1 12+033 Dse the following to answer 9uestions 87488: Sou5a #nc+ which produces and sells a single product+ has pro!ided its contribution format income statement for October. Sales :.+333 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 177+33 3 .3+333 .7+333 .1+233 1 0+-33
87. #f the company sells -+033 units+ its total contribution margin should be closest to: A; 1-8+)33 B; 1/+023 C; 1.-+)33 A; 1.7+333 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy

Solution: Sales price per unit I 177+333 ? .+333 units I 1)) *ariable expense per unit I 1.3+333 ? .+333 units I 113 Sales :-+033 units;............. 128+)33 *ariable expenses.............. -0+333 Contribution margin.......... 1.-+)33 88. #f the company sells -+/33 units+ its net operating income should be closest to: A; 1/+/1B; 10+-33 C; 1-33 A; 41.+233 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales price per unit I 177+333 ? .+333 units I 1)) *ariable expense per unit I 1.3+333 ? .+333 units I 113 Sales :-+/33 units;............. 122+333 *ariable expenses.............. -/+333 Contribution margin.......... .)+333 %ixed expenses................... .1+233 &et operating income......... 1 -33 Dse the following to answer 9uestions 1334131: Bight Corporation has pro!ided its contribution format income statement for June. The company produces and sells a single product. Sales :8+033 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1--0+33 3 1..+333 18)+333 1-2+333 1 //+333
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133. #f the company sells 8+133 units+ its total contribution margin should be closest to: A; 112.+/33 B; 118)+333 C; 1/)+1-/ A; 117)+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales price per unit I 1--0+333 ? 8+033 units I 1-/ *ariable expense per unit I 11..+333 ? 8+033 units I 11/ 1-17+/3 Sales :8+133 units;............. 3 *ariable expenses.............. 1-0+/33 117)+33 Contribution margin.......... 3 131. #f the company sells 8+233 units+ its net operating income should be closest to: A; 1/2+333 B; 1//+333 C; 1//+/2A; 1/7+/33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 1 'e!el: ,asy Solution: Sales price per unit I 1--0+333 ? 8+033 units I 1-/ *ariable expense per unit I 11..+333 ? 8+033 units I 11/ 1--8+/3 Sales :8+233 units;............. 3 1./+/3 *ariable expenses.............. 3 Contribution margin.......... 18.+333 1-2+33 %ixed expenses................... 3 1 &et operating income......... /2+333

Dse the following to answer 9uestions 13)413-: The following information relates to %rancisca Company: Aegree of operating le!erage......... )./ $rofit margin percentage............... ).H (argin of safety percentage.......... .3H Contribution margin ratio.............. 03H 13). #f %ranciscaLs sales increase by )3H+ by what percentage will its net operating income increaseC A; ..7H B; 7H C; 1)H A; /3H Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: (edium Solution: $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I )3H K )./ I /3H 13-. %rancisca wants to gi!e its sales staff a 103+333 increase in salary but still wants to ma"e the same net operating income. #f %rancisca gi!es this increase+ by how much would sales at %rancisca ha!e to increase in order for the company to maintain its current net operating income le!elC A; 103+333 B; 1133+333 C; 11/3+333 A; 1)/3+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 . 'e!el: (edium Solution: #ncrease in sales dollars I Additional fixed expenses ? Contribution margin ratio I 103+333 ? 3.03 I 1133+333
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Dse the following to answer 9uestions 13.4137: The following data relate to a company that produces and sells a tra!el guide that is updated monthly: %ixed costs: Copy editing........................................... 10+333 Art wor".................................................. 1)+333 Typesetting............................................. 12)+333 *ariable costs: 1-.)3 per $rinting and binding............................... copy 1..33 per Boo"store discounts................................ copy 13./3 per SalespersonsT commissions.................... copy 1).33 per AuthorTs royalties................................... copy ,ach boo" sells for 1)3.33. The company sold 7+333 boo"s in June and 13+333 boo"s in July. 13.. The unit contribution margin per boo" is: A; 113.-3 B; 11..-3 C; 113.73 A; 17.-3 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Dnit contribution margin I Dnit sales price 4 *ariable expense per unit I 1)3.33 4 :1-.)3 G 1..33 G 13./3 G 1).33; I 113.-3 13/. The contribution margin ratio for the boo" is: A; 21./H B; /..3H C; /1./H A; /1.8H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: (edium

Solution: Dnit contribution margin I Dnit sales price 4 *ariable expense per unit I 1)3.33 4 :1-.)3 G 1..33 G 13./3 G 1).33; I 113.-3 Contribution margin ratio I Contribution margin ? Sales Contribution margin ratio I 113.-3 ? 1)3.33 Contribution margin ratio I /1./H 130. The brea"4e!en point in units is: A; 7+).2 boo"s B; 2+202 boo"s C; 2+.32 boo"s A; 0+/3. boo"s Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium Solution: *ariable expense per unit I 1-.)3 G 1..33 G 13./3 G 1).33 I 18.23 Sales I *ariable expenses G %ixed expenses G $rofit 1)3.33< I 18.23< G 173+333 G 13 113.-3< I 173+333 < I 173+333 ? 113.-3 per unit I 2+202 units :rounded;
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132. The degree of operating le!erage for July is: A; the same as that for June B; higher than that for June C; lower than that for June A; not determinable Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: @ard Solution: %or June: *ariable expense per unit I 1-.)3 G 1..33 G 13./3 G 1).33 I 18.23 1103+33 Sales :7+333 units;............. 3 22+03 *ariable expenses.............. 3 Contribution margin.......... 7)+.33 73+33 %ixed expenses................... 3 1 &et operating income......... )+.33 Aegree of operating le!erage I Contribution marginF&et operating income I 17)+.33F1)+.33 I -..-%or July: *ariable expense per unit I 1-.)3 G 1..33 G 13./3 G 1).33 I 18.23 1)33+33 Sales :13+333 units;........... 3 82+33 *ariable expenses.............. 3 Contribution margin.......... 13-+333 73+33 %ixed expenses................... 3 1 &et operating income......... )-+333 Aegree of operating le!erage I Contribution marginF&et operating income I 113-+333F1)-+333 I ...7 As sales increase past the brea"e!en point+ the degree of operating le!erage will decrease.

137. The degree of operating le!erage for July is closest to: A; ...7 B; -..7 C; ..)) A; 7.23 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: (edium Solution: *ariable expense per unit I 1-.)3 G 1..33 G 13./3 G 1).33 I 18.23 1)33+33 Sales :13+333 units;........... 3 82+33 *ariable expenses.............. 3 Contribution margin.......... 13-+333 73+33 %ixed expenses................... 3 1 &et operating income......... )-+333 Aegree of operating le!erage I Contribution marginF&et operating income I 113-+333F1)-+333 I ...7 Dse the following to answer 9uestions 1384111: A manufacturer of cedar shingles has supplied the following data: Bundles of cedar sha"es produced and sold.......... Sales re!enue......................................................... *ariable manufacturing expense........................... %ixed manufacturing expense................................ *ariable selling and administrati!e expense......... %ixed selling and administrati!e expense.............. &et operating income............................................. -03+333 1)+.1)+33 3 11+123+33 3 121.+333 1.1.+333 17)+333 1-)+333
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138. The companyLs brea"4e!en in unit sales is closest to: A; 117+730 B; )30+8/2 C; -.0+372 A; 1.+22/ Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium Solution: Sales price per unit I 1)+.1)+333 ? -03+333 units I 10.23 *ariable expense per unit I :11+123+333 G 1.1.+333; ? -03+333 units I 1...3 Sales I *ariable expenses G %ixed expenses G $rofit 10.23< I 1...3< G 1280+333 G 13 1).-3< I 1280+333 < I 1280+333 ? 1).-3 per unit I -.0+372 units :rounded; 113. The companyLs contribution margin ratio is closest to: A; 2).0H B; 0/.2H C; -..-H A; )2..H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Contribution margin I Sales 4 *ariable expenses Contribution margin I 1)+.1)+333 4 11+/7.+333 I 17)7+333 Contribution margin ratio I Contribution margin ? Sales Contribution margin ratio I 17)7+333 ? 1)+.1)+333 Contribution margin ratio I -..-H

111. The companyLs degree of operating le!erage is closest to: A; 11.)/ B; )/.77 C; 1.88 A; 2/.-7 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: (edium Solution: Sales................................... 1)+.1)+333 *ariable expenses.............. 1+/7.+333 Contribution margin.......... 7)7+333 %ixed expenses................... 280+333 &et operating income......... 1 -)+333 Aegree of operating le!erage I Contribution marginF&et operating income I 17)7+333F1-)+333 I )/.77 Dse the following to answer 9uestions 11)411-: Carr #nc. produces small motors that sell for 11/ each. Cost data on the motors are pro!ided below: Sales in units per year................................ 2+333 *ariable production cost............................ 1/.33 per unit *ariable selling expense............................ 1).33 per unit *ariable administrati!e expense................ 11./3 per unit %ixed expenses per year: Building rent........................................... 113+333 ,9uipment depreciation.......................... .+333 Selling expense....................................... 7+333 Administrati!e expense.......................... 1/+333 Total fixed expenses.................................. 1-2+333
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11). The contribution margin ratio is :round to nearest tenth of a percent;: A; /0.2H B; .-.-H C; 00.2H A; /-.-H Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: Dnit contribution margin I 11/.33 4 :1/.33 G 1).33 G 11./3; I 10./3 Contribution margin ratio I Contribution margin ? Sales Contribution margin ratio I 10./3 ? 11/.33 Contribution margin ratio I .-.-H 11-. #f the selling price is increased by 13 percent+ what will be the new brea"4e!en point in units :round to the nearest unit;C A; -+78/ units B; .+0)/ units C; -+233 units A; -+)12 units Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: *ariable expense per unit I 1/.33 G 1).33 G 11./3 I 17./3 Sales I *ariable expenses G %ixed expenses G $rofit 110./3< I 17./3< G 1-2+333 G 13 17.33< I 1-2+333 < I 1-2+333 ? 17.33 per unit I .+0)/ units

Dse the following to answer 9uestions 11.411/: :C$A+ adapted; The (axwell Company manufactures and sells a single product. Budgeted data follow: %orecasted annual sales !olume................ 1)3+333 units Selling price per unit.................................. 1)/.33 *ariable expenses per unit: aw materials......................................... 111.33 Airect labor............................................. /.33 (anufacturing o!erhead......................... )./3 Selling expenses..................................... 1.-3 Total !ariable expenses per unit................ 118.73 Annual fixed expenses: (anufacturing o!erhead......................... 118)+333 Selling and administrati!e...................... )20+333 Total fixed expenses.................................. 1.07+333 11.. (axwellLs brea"4e!en point in units is: A; 20+002 B; 83+333 C; 1-3+333 A; 2)+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Source: C$A6 adapted Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1)/.33< I 118.73< G 1.07+333 G 13 1/.)3< I 1.07+333 < I 1.07+333 ? 1/.)3 per unit I 83+333 units
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11/. #f (axwell CompanyLs direct labor costs increase 7 percent+ what selling price per unit of product must it charge to maintain the same contribution margin ratioC A; 1)/./1 B; 1)2.33 C; 1)/..3 A; 1)0.0. Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: -6 / 'e!el: @ard Source: C$A6 adapted Solution: Current contribution margin per unit I Selling price per unit E Total !ariable expenses per unit I 1)/.33 E 118.73 I 1/.)3 Current contribution margin ratio I Contribution margin ? Selling price per unit 1/.)3 ? 1)/.33 I )3.7H Airect labor per unit K 3.37 I #ncrease in !ariable expense 1/.33 K 3.37 I 13..3 &ew total !ariable expenses per unit I 118.73 G 13..3 I 1)3.)3 3.)37 I :Selling price E 1)3.)3; ? Selling price 3.)37 K Selling price I Selling price E 1)3.)3 1)3.)3 I Selling price E 3.)37 K Selling price 1)3.)3 I 3.28) K Selling price Selling price I 1)/./1 Dse the following to answer 9uestions 1104112: The following data was pro!ided by Mreen Corporation: $roduct A 173+333 -3H $roduct B $roduct C 11)3+333 1133+333 ./H )2H
Sales in dollars............................... Contribution margin ratio..............

110. The contribution margin ratio for the company as a whole is: A; -.H B; 0/H C; -/H A; 00.2H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: - 'e!el: ,asy Solution: $roduct A Sales................................... Contribution margin :Sales K Contribution margin ratio;............................... 173+333 1).+333 $roduct B $roduct C 11)3+333 1/.+333 1133+333 1)2+333 Total 1-33+33 3 13/+333
O!erall C( ratio I Total contribution marginFTotal sales I 113/+333F1-33+333 I -/H 112. #f total units sold remain unchanged+ but the sales mix shifts more hea!ily toward $roduct B+ one would expect the o!erall contribution margin ratio to: A; increase B; decrease C; remain unchanged A; none of these Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy Dse the following to answer 9uestions 11741)3: &ext year+ (udd %ace Cosmetics+ a single product company+ expects to sell 8+333 Qars of miracle gla5e. (udd %ace is budgeting the following operating results for next year: Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1./3+33 3 1-/+333 -1/+333 )/)+333 1 0-+333
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117. @ow many Qars of gla5e would (udd %ace ha!e to sell next year in order to brea"4 e!enC A; )+233 B; /+3.3 C; 0+2/3 A; 2+)33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: (edium Solution: Total 1./3+333 1-/+333 1 -1/+333 $ercent of Sales 133.3H -3.3H 23.3H
Sales......................................................................... *ariable expenses..................................................... Contribution margin and contribution margin ratio.
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 1)/)+333F3.233 I 1-03+333 Selling price per unit I 1./3+333 ? 8+333 Qars I 1/3 per Qar Brea"4e!en in units I Brea"4e!en sales dollars ? Selling price per unit I 1-03+333 ? 1/3 I 2+)33 Qars 118. Bhat would (udd %aceLs total sales dollars ha!e to be next year in order to increase its proQected net operating income by )/HC A; 1.0/+2/3 B; 1.2)+/33 C; 1.88+/33 A; 1/0)+/33 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: .6 0 'e!el: (edium Solution: Contribution margin ratio I 1-1/+333 ? 1./3+333 I 23H Aesired net operating income I :10-+333 K 1.)/; I 127+2/3 Sales dollars needed to earn 127+2/3 I :%ixed expenses G Target net operating income; ? Contribution margin ratio I :1)/)+333 G 127+2/3; ? 3.23 I 1.2)+/33
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1)3. #f sales next year at (udd %ace are 13H higher than expected+ its net operating income should be: A; 1.+.13 higher than expected. B; 10+-33 higher than expected. C; 1-1+/33 higher than expected. A; 1..+133 higher than expected. Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Aegree of operating le!erage I Contribution margin ? &et operating income I 1-1/+333 ? 10-+333 I / Therefore+ increase in net operating income will be / K 13H+ or /3H+ higher. Current net operating income K /3H I 10-+333 K /3H I 1-1+/33 increase Dse the following to answer 9uestions 1)141)): (rs. after has supplied the following data for her small business: Selling price....................... *ariable expenses.............. ent.................................... Salaries............................... Other fixed expenses......... 113 per unit 10 per unit 1.33 per wee" 1033 per wee" 1)33 per wee"
1)1. #f /33 units are sold in a wee"+ the net operating income :loss; would be: A; 11+733 B; 1:)+333; C; 1)+333 A; 1733 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1/+333 -+333 )+333 1+)33 1 733

1)). #f sales commissions 1:1.33 per unit; are discontinued in fa!or of a 1-33 increase in salaries+ the brea"4e!en point in units would: A; increase B; decrease C; remain the same A; none of these Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: .6 / 'e!el: (edium Dse the following to answer 9uestions 1)-41)0: &ext year+ ad Shirt Company expects to sell -)+333 shirts. ad is budgeting the following operating results for next year: Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 1733+33 3 )77+333 /1)+333 18)+333 1-)3+33 3
1)-. Bhat is adLs margin of safety for next yearC A; 1.73+333 B; 1/33+333 C; 1/1)+333 A; 1037+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: (edium
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Solution: Sales................................................................ *ariable expenses............................................ Contribution margin and contribution margin ratio.............................................................. Total 1733+333 )77+333 1 /1)+333 $ercent of Sales 133.3H -0H 0.H
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 118)+333F3.0. I 1-33+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1733+333 E 1-33+333 I 1/33+333 1).. Bhat is adLs degree of operating le!erage for next yearC A; 1./3 B; 1./0 C; 1.03 A; )./3 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 1/1)+333F1-)3+333 I 1.03

1)/. @ow many shirts would ad ha!e to sell next year in order to generate 1.73+333 of net operating incomeC A; -7+.33 B; .7+333 C; 03+333 A; .)+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: (edium Solution: Sales price I 1733+333 ? -)+333 units I 1)/ *ariable expense per unit I 1)77+333 ? -)+333 units I 18 Sales I *ariable expenses G %ixed expenses G Target profit 1)/< I 18< G 118)+333 G 1.73+333 110< I 102)+333 < I 102)+333 ? 110 per unit I .)+333 units 1)0. ad is considering increasing its ad!ertising by 1.7+333 next year. By how much would sales ha!e to increase in order for ad to still generate a 1-)3+333 net operating incomeC A; 1.7+333 B; 12/+333 C; 120+733 A; 11)3+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: @ard
6-$1
Solution: Current $roposed 1733+33 3 )77+333 /1)+333 1/03+333 N 18)+333 ).3+333 1-)3+33 1-)3+333 3
Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses...............................
&et operating income..................... NBor" bac"wards to obtain the number. Sales price I 1733+333 ? -)+333 units I 1)/ *ariable expense per unit I 1)77+333 ? -)+333 units I 18 Contribution margin per unit I 1)/ E 18 I 110 1/03+333 ? 110 I -/+333 units -/+333 E -)+333 I -+333 unit increase -+333 K 1)/ I 12/+333 increase in sales Dse the following to answer 9uestions 1)241-3:
@oupe Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 11.3 *ariable expenses.............. .) Contribution margin.......... 1 87 $ercent of Sales 133H -3H 23H
%ixed expenses are 1.83+333 per month. The company is currently selling 0+333 units per month. Consider each of the following 9uestions independently.

1)2. This 9uestion is to be considered independently of all other 9uestions relating to @oupe Corporation. efer to the original data when answering this 9uestion. The mar"eting manager belie!es that a 11.+333 increase in the monthly ad!ertising budget would result in a 1/3 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1233 B; increase of 11.+233 C; decrease of 11.+333 A; decrease of 1233 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :0+333 units K 11.3+ 0+1/3 units K 11.3;....... *ariable expenses :0+333 units K 1.)+ 0+1/3 units K 1.);...................................................................... Contribution margin................................................ %ixed expenses......................................................... &et operating income.............................................. 0+333 units 17.3+333 )/)+333 /77+333 .83+333 1 87+333 0+1/3 units 1701+333 )/7+-33 03)+233 /3.+333 1 87+233
#ncrease in net operating income: 187+233 E 187+333 I 1233
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1)7. This 9uestion is to be considered independently of all other 9uestions relating to @oupe Corporation. efer to the original data when answering this 9uestion. (anagement is considering using a new component that would increase the unit !ariable cost by 1/. Since the new component would increase the features of the companyLs product+ the mar"eting manager predicts that monthly sales would increase by -33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1)+133 B; decrease of 1)2+833 C; increase of 1)+133 A; increase of 1)2+833 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :0+333 units K 11.3+ 0+-33 units K 11.3;.... *ariable expenses :0+333 units K 1.)+ 0+-33 units K 1.2;................................................................ Contribution margin............................................. %ixed expenses...................................................... &et operating income........................................... 0+333 units 17.3+333 )/)+333 /77+333 .83+333 1 87+333 0+-33 units 177)+333 )80+133 /7/+833 .83+333 1 8/+833
Aecrease in net operating income: 187+333 E 18/+833 I 1)+133

1)8. This 9uestion is to be considered independently of all other 9uestions relating to @oupe Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to cut the selling price by 12 and increase the ad!ertising budget by 1)7+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by /33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 112+/33 B; increase of 112+/33 C; decrease of 1).+/33 A; increase of 1-7+/33 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :0+333 units K 11.3+ 0+/33 units K 11--;. *ariable expenses :0+333 units K 1.)+ 0+/33 units K 1.);.................................................... Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ 0+333 units 17.3+333 )/)+333 /77+333 .83+333 1 87+333 0+/33 units 170.+/33 )2-+333 /81+/33 /17+333 1 2-+/33
Aecrease in net operating income: 187+333 E 12-+/33 I 1).+/33
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1-3. This 9uestion is to be considered independently of all other 9uestions relating to @oupe Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 111 per unit. #n exchange+ the sales staff would accept a decrease in their salaries of 1/7+333 per month. :This is the companyLs sa!ings for the entire sales staff.; The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by 133 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1233 B; increase of 1/0+833 C; decrease of 111/+-33 A; increase of 1/77+233 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :0+333 units K 11.3+ 0+133 units K 11.3;..... *ariable expenses :0+333 units K 1.)+ 0+133 units K 1/-;................................................................. Contribution margin............................................... %ixed expenses....................................................... &et operating income............................................. 0+333 units 17.3+333 )/)+333 /77+333 .83+333 1 87+333 0+133 units 17/.+333 -)-+-33 /-3+233 .-)+333 1 87+233
#ncrease in net operating income: 187+233 E 187+333 I 1233 Dse the following to answer 9uestions 1-141-.: Aata concerning 'emelin CorporationLs single product appear below: Selling price................................... *ariable expenses.......................... Contribution margin...................... $er Dnit 1)-3 11/ 111/ $ercent of Sales 133H /3H /3H
The company is currently selling 2+333 units per month. %ixed expenses are 1/71+333 per month. Consider each of the following 9uestions independently.

1-1. This 9uestion is to be considered independently of all other 9uestions relating to 'emelin Corporation. efer to the original data when answering this 9uestion. (anagement is considering using a new component that would increase the unit !ariable cost by 1-. Since the new component would increase the features of the companyLs product+ the mar"eting manager predicts that monthly sales would increase by )33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1))+.33 B; decrease of 11+.33 C; increase of 1))+.33 A; increase of 11+.33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :2+333 units K 1)-3+ 2+)33 units K 1)-3;. . *ariable expenses :2+333 units K 111/+ 2+)33 units K 1117;.................................................... Contribution margin............................................ %ixed expenses.................................................... &et operating income.......................................... 2+333 units 11+013+333 73/+333 73/+333 /71+333 1 )).+333 2+)33 units 11+0/0+333 7.8+033 730+.33 /71+333 1 ))/+.33
#ncrease in net operating income: 1))/+.33 E 1)).+333 I 11+.33 1-). This 9uestion is to be considered independently of all other 9uestions relating to 'emelin Corporation. efer to the original data when answering this 9uestion. The mar"eting manager belie!es that a 111+333 increase in the monthly ad!ertising budget would result in a 133 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 111+333 B; increase of 111+/33 C; decrease of 1/33 A; increase of 1/33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy
6-$7
Solution: Sales :2+333 units K 1)-3+ 2+133 units K 1)-3;. *ariable expenses :2+333 units K 111/+ 2+133 units K 111/;.................................................. Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ 2+333 units 11+013+333 73/+333 73/+333 /71+333 1 )).+333 2+133 units 11+0--+333 710+/33 710+/33 /8)+333 1 )).+/33
#ncrease in net operating income: 1)).+/33 E 1)).+333 I 1/33 1--. This 9uestion is to be considered independently of all other 9uestions relating to 'emelin Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 1)3 per unit. #n exchange+ the sales staff would accept a decrease in their salaries of 111-+333 per month. :This is the companyLs sa!ings for the entire sales staff.; The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by -33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1)).+/33 B; increase of 1132+333 C; increase of 11+/33 A; increase of 1730+/33 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :2+333 units K 1)-3+ 2+-33 units K 1)-3;. . *ariable expenses :2+333 units K 111/+ 2+-33 units K 11-/;.................................................... Contribution margin............................................ %ixed expenses.................................................... &et operating income.......................................... 2+333 units 11+013+333 73/+333 73/+333 /71+333 1 )).+333 2+-33 units 11+028+333 87/+/33 08-+/33 .07+333 1 ))/+/33
#ncrease in net operating income: 1))/+/33 E 1)).+333 I 11+/33

1-.. This 9uestion is to be considered independently of all other 9uestions relating to 'emelin Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to cut the selling price by 117 and increase the ad!ertising budget by 1-2+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by 1+033 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 1117+)33 B; increase of 1-3)+)33 C; decrease of 1117+)33 A; decrease of 12+733 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :2+333 units K 1)-3+ 7+033 units K 1)1);. *ariable expenses :2+333 units K 111/+ 7+033 units K 111/;.................................................. Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ 2+333 units 11+013+333 73/+333 73/+333 /71+333 1 )).+333 7+033 units 11+7)-+)33 878+333 7-.+)33 017+333 1 )10+)33
Aecrease in net operating income: 1)).+333 E 1)10+)33 I 12+733 Dse the following to answer 9uestions 1-/41-7: Thornbrough Corporation produces and sells a single product with the following characteristics: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 1))3 .. 1120 $ercent of Sales 133H )3H 73H
The company is currently selling 2+333 units per month. %ixed expenses are 1831+333 per month. Consider each of the following 9uestions independently.
6-$9
1-/. This 9uestion is to be considered independently of all other 9uestions relating to Thornbrough Corporation. efer to the original data when answering this 9uestion. (anagement is considering using a new component that would increase the unit !ariable cost by 111. Since the new component would increase the features of the companyLs product+ the mar"eting manager predicts that monthly sales would increase by /33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 17)+/33 B; decrease of 1/+/33 C; decrease of 17)+/33 A; increase of 1/+/33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy Solution: Sales :2+333 units K 1))3+ 2+/33 units K 1))3;. *ariable expenses :2+333 units K 1..+ 2+/33 units K 1//;.................................................... Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ 2+333 units 11+/.3+333 -37+333 1+)-)+333 831+333 1 --1+333 2+/33 units 11+0/3+333 .1)+/33 1+)-2+/33 831+333 1 --0+/33
#ncrease in net operating income: 1--0+/33 E 1--1+333 I 1/+/33 1-0. This 9uestion is to be considered independently of all other 9uestions relating to Thornbrough Corporation. efer to the original data when answering this 9uestion. The mar"eting manager belie!es that a 1)7+333 increase in the monthly ad!ertising budget would result in a 183 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 1)7+333 B; increase of 1--+..3 C; increase of 1/+..3 A; decrease of 1/+..3 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: ,asy

Solution: Sales :2+333 units K 1))3+ 2+183 units K 1))3;. *ariable expenses :2+333 units K 1..+ 2+183 units K 1..;.................................................... Contribution margin.......................................... %ixed expenses................................................... &et operating income........................................ 2+333 units 11+/.3+333 -37+333 1+)-)+333 831+333 1 --1+333 2+183 units 11+/71+733 -10+-03 1+)0/+..3 8)8+333 1 --0+..3
#ncrease in net operating income: 1--0+..3 E 1--1+333 I 1/+..3 1-2. This 9uestion is to be considered independently of all other 9uestions relating to Thornbrough Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to cut the selling price by 117 and increase the ad!ertising budget by 1/-+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by 1+333 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; decrease of 113/+333 B; increase of 11.8+333 C; increase of 113/+333 A; decrease of 1)1+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :2+333 units K 1))3+ 7+333 units K 1)3);.... *ariable expenses :2+333 units K 1..+ 7+333 units K 1..;................................................................ Contribution margin............................................. %ixed expenses...................................................... &et operating income........................................... 2+333 units 11+/.3+333 -37+333 1+)-)+333 831+333 1 --1+333 7+333 units 11+010+333 -/)+333 1+)0.+333 8/.+333 1 -13+333
Aecrease in net operating income: 1--1+333 E 1-13+333 I 1)1+333
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1-7. This 9uestion is to be considered independently of all other 9uestions relating to Thornbrough Corporation. efer to the original data when answering this 9uestion. The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 111 per unit. #n exchange+ the sales staff would accept a decrease in their salaries of 10/+333 per month. :This is the companyLs sa!ings for the entire sales staff.; The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by -33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC A; increase of 11+)08+/33 B; increase of 1-2+/33 C; increase of 101+233 A; decrease of 18)+/33 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: . 'e!el: (edium Solution: Sales :2+333 units K 1))3+ 2+-33 units K 1))3;..... *ariable expenses :2+333 units K 1..+ 2+-33 units K 1//;................................................................. Contribution margin............................................... %ixed expenses....................................................... &et operating income............................................. 2+333 units 11+/.3+333 -37+333 1+)-)+333 831+333 1 --1+333 2+-33 units 11+030+333 .31+/33 1+)3.+/33 7-0+333 1 -07+/33
#ncrease in net operating income: 1-07+/33 E 1--1+333 I 1-2+/33 Dse the following to answer 9uestions 1-841.3: Tricia Corporation is a single product firm that sells its product for 1)./3 per unit. *ariable expense per unit at Tricia is 11.33. Tricia expects fixed expenses to total 117+333 for next year.

1-8. @ow many units would Tricia ha!e to sell next year in order to brea"4e!enC A; 2+)33 B; 1)+333 C; -3+333 A; ./+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1)./3< I 11.33< G 117+333 G 13 11./3< I 117+333 < I 117+333 ? 11./3 per unit I 1)+333 units 1.3. Bhat would TriciaLs total sales dollars ha!e to be next year in order to generate 1./+333 of net operating incomeC A; 1-3+333 B; 1.)+333 C; 12/+333 A; 113/+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Contribution margin I Sales price 4 *ariable expense per unit Contribution margin I 1)./3 4 11.33 I 11./3 C( ratio I 11./3 ? 1)./3 I 3.03 Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :117+333 G 1./+333;F3.03 I 113/+333
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Dse the following to answer 9uestions 1.141.): Ranetti Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1113.33 1-..13 11-)+30 0
1.1. The brea"4e!en in monthly unit sales is closest to: A; -+72B; 1+2.3 C; 1+)31 A; )+)21 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1113.33< I 1-..13< G 11-)+300 G 13 12/.83< I 11-)+300 < I 11-)+300 ? 12/.83 per unit I 1+2.3 units 1.). The brea"4e!en in monthly dollar sales is closest to: A; 1181+.33 B; 1).8+713 C; 1.)0+3-3 A; 11-)+113 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy

Solution: Sales......................................................................... *ariable expenses..................................................... Contribution margin and contribution margin ratio. $er Dnit 1113.33 -..13 1 2/.83 $ercent of Sales 133.3H -1.3H 08.3H
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 11-)+300F3.08 I 1181+.33 Dse the following to answer 9uestions 1.-41..: Aata concerning Sinisi CorporationLs single product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1)33.33 1/7.33 1.32+/. 3
1.-. The brea"4e!en in monthly unit sales is closest to: A; )+3-7 B; 2+3)2 C; )+723 A; -+827 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1)33< I 1/7< G 1.32+/.3 G 13 11.)< I 1.32+/.3 < I 1.32+/.3 ? 11.) per unit I )+723 units
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1... The brea"4e!en in monthly dollar sales is closest to: A; 1.32+033 B; 11+.3/+.33 C; 1/2.+333 A; 128/+033 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales......................................................................... *ariable expenses..................................................... Contribution margin and contribution margin ratio. $er Dnit 1)33 /7 11.) $ercent of Sales 133.3H )8.3H 21.3H
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 1.32+/.3F3.21 I 1/2.+333 Dse the following to answer 9uestions 1./41.0: @eathman #nc. produces and sells a single product. The selling price of the product is 1)-3.33 per unit and its !ariable cost is 178.23 per unit. The fixed expense is 1-37+003 per month. 1./. The brea"4e!en in monthly unit sales is closest to: A; )+-)7 B; 1+-.) C; -+..1 A; )+)33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G $rofit 1)-3.33< I 178.23< G 1-37+003 G 13 11.3.-3< I 1-37+003 < I 1-37+003 ? 11.3.-3 per unit I )+)33 units

1.0. The brea"4e!en in monthly dollar sales is closest to: A; 1281+.-0 B; 1/-/+-0/ C; 1/30+333 A; 1-37+003 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: / 'e!el: ,asy Solution: Sales......................................................................... *ariable expenses..................................................... Contribution margin and contribution margin ratio. $er Dnit 1)-3.33 78.23 11.3.-3 $ercent of Sales 133.3H -8.3H 01.3H
Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 1-37+003F3.01 I 1/30+333 Dse the following to answer 9uestions 1.241.7: (a5iar5 Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 1))3.33 12).03 1/.7+-) 7
1.2. Assume the companyLs monthly target profit is 11.+333. The unit sales to attain that target profit is closest to: A; 2+2.0 B; )+//0 C; .+230 A; -+71/ Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 1))3.33< I 12).03< G 1/.7+-)7 G 11.+333 11.2..3< I 1/0)+-)7
Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 6-97
< I 1/0)+-)7 ? 11.2..3 per unit I -+71/ units :rounded;

1.7. Assume the companyLs monthly target profit is 110+333. The dollar sales to attain that target profit is closest to: A; 1/0.+-)7 B; 11+213+37/ C; 11+3-7+787 A; 17.)+)71 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Contribution margin per unit I Sales price 4 *ariable expense per unit Contribution margin per unit I 1))3.33 4 12).03 I 11.2..3 C( ratio I 11.2..3 ? 1))3.33 I 3.02 Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1/.7+-)7 G 110+333;F3.02 I 17.)+)71 :rounded; Dse the following to answer 9uestions 1.841/3: Aata concerning Strite CorporationLs single product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... 11/3.33 1.).33 1.)1+)3 3
1.8. Assume the companyLs monthly target profit is 112+333. The unit sales to attain that target profit is closest to: A; /+73. B; )+8)1 C; .+3/2 A; 13+.-Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 11/3< I 1.)< G 1.)1+)33 G 112+333 1137< I 1.-7+)33 < I 1.-7+)33 ? 1137 per unit I .+3/2 units :rounded;
Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 6-99
1/3. Assume the companyLs monthly target profit is 17+333. The dollar sales to attain that target profit is closest to: A; 1/80+111 B; 11+/-)+7/2 C; 17/)+2)A; 1.)8+)33 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Contribution margin per unit I Sales price 4 *ariable expense per unit Contribution margin per unit I 11/3.33 4 1.).33 I 1137.33 C( ratio I 1137.33 ? 11/3.33 I 3.2) Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1.)1+)33 G 17+333;F3.2) I 1/80+111 :rounded; Dse the following to answer 9uestions 1/141/): Spec"man ,nterprises+ #nc.+ produces and sells a single product whose selling price is 1)33.33 per unit and whose !ariable expense is 107.33 per unit. The companyLs monthly fixed expense is 1/1.+733. 1/1. Assume the companyLs monthly target profit is 111+333. The unit sales to attain that target profit is closest to: A; )+0)8 B; -+87C; .+271 A; 2+2-) Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Sales I *ariable expenses G %ixed expenses G Target profit 1)33.33< I 107.33< G 1/1.+733 G 111+333 11-).33< I 1/)/+733 < I 1/)/+733 ? 11-) per unit I -+87- units :rounded;

1/). Assume the companyLs monthly target profit is 11)+333. The dollar sales to attain that target profit is closest to: A; 11+/.8+.1) B; 1287+17) C; 1/)0+733 A; 18/7+1-1 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 0 'e!el: ,asy Solution: Contribution margin per unit I Sales price 4 *ariable expense per unit Contribution margin per unit I 1)33.33 4 107.33 I 11-).33 C( ratio I 11-).33 ? 1)33.33 I 3.00 Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1/1.+733 G 11)+333;F3.00 I 1287+17) :rounded; Dse the following to answer 9uestions 1/-41/.: Jerrel Corporation sells a product for 1)-3 per unit. The productLs current sales are ).+333 units and its brea"4e!en sales are 12+)73 units. 1/-. Bhat is the margin of safety in dollarsC A; 1/+/)3+333 B; 11+/./+033 C; 1-+82.+.33 A; 1-+073+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1)-3 per unit K 12+)73 units I 1-+82.+.33 Current sales I 1)-3 per unit K ).+333 units I 1/+/)3+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1/+/)3+333 E 1-+82.+.33 I 11+/./+033
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1/.. The margin of safety as a percentage of sales is closest to: A; 01H B; )7H C; 2)H A; -8H Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1)-3 per unit K 12+)73 units I 1-+82.+.33 Current sales I 1)-3 per unit K ).+333 units I 1/+/)3+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1/+/)3+333 E 1-+82.+.33 I 11+/./+033 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 11+/./+033 ? 1/+/)3+333 I )7H Dse the following to answer 9uestions 1//41/0: (arus"a Corporation has pro!ided the following data concerning its only product: Selling price....................... 1173 per unit Current sales...................... )8+733 units Brea"4e!en sales................ )/+3-) units

1//. Bhat is the margin of safety in dollarsC A; 1.+/3/+203 B; 17/7+).3 C; 1-+/20+333 A; 1/+-0.+333 Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1173 per unit K )/+3-) I 1.+/3/+203 Current sales I 1173 per unit K )8+733 I 1/+-0.+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1/+-0.+333 E 1.+/3/+203 I 17/7+).3 1/0. The margin of safety as a percentage of sales is closest to: A; 18H B; 10H C; 7.H A; 71H Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 2 'e!el: ,asy Solution: (argin of safety in dollars: Brea"4e!en sales I 1173 per unit K )/+3-) I 1.+/3/+203 Current sales I 1173 per unit K )8+733 I 1/+-0.+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 1/+-0.+333 E 1.+/3/+203 I 17/7+).3 (argin of safety as a percentage of sales I (argin of safety in dollars ? Current sales I 17/7+).3 ? 1/+-0.+333 I 10H
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Dse the following to answer 9uestions 1/241/7: Bois Corporation has pro!ided its contribution format income statement for January. Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1.)0+.3 3 )03+333 100+.33 1)3+833 1 ./+/33
1/2. The degree of operating le!erage is closest to: A; 3.11 B; 8.-2 C; 3.)2 A; -.00 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 1100+.33F1./+/33 I -.00 1/7. #f the companyLs sales increase by 2H+ its net operating income should increase by about: A; )0H B; 2H C; 00H A; 11H Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 1100+.33F1./+/33 I -.00 $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 2H K -.00 I )0H

Dse the following to answer 9uestions 1/84103: The July contribution format income statement of Aoxtater Corporation appears below: Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 1/0.+.3 3 -1)+733 )/1+033 18-+733 1 /2+733
1/8. The degree of operating le!erage is closest to: A; 3.)B; 3.13 C; ..-/ A; 8.20 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 1)/1+033F1/2+733 I ..-/ 103. #f the companyLs sales increase by 18H+ its net operating income should increase by about: A; 13H B; 18H C; 7-H A; 170H Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 7 'e!el: ,asy Solution: Aegree of operating le!erage I Contribution marginF&et operating income I 1)/1+033F1/2+733 I ..-/ $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 18H K ..-/ I 7-H
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Dse the following to answer 9uestions 101410): Taylor+ #nc. produces only two products+ Acdom and Belnom. These account for 03H and .3H of the total sales dollars of Taylor+ respecti!ely. The unit !ariable expense as a percentage of the selling price is 03H for Acdom and 7/H for Belnom. Total fixed expenses are 11/3+333. There are no other costs. 101. Bhat is TaylorLs brea"4e!en point in sales dollarsC A; 11/3+333 B; 1)1.+)70 C; 1-33+333 A; 1/33+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: @ard Solution: ,ach productTs contribution margin rate is :1 E !ariable expense percentage; Acdom I 1 E 3.0 I 3.. Belnom I 1 E 3.7/ I 3.1/ To calculate the weighted a!erage contribution margin+ multiply each productTs contribution margin ratio by its percentage of total sales dollars: :03H K 3..H; G :.3H K 3.1/H; I 3.).H G 3.30H I 3.-3H To calculate the brea"4e!en point in sales dollars: %ixed expenses ? Beighted a!erage contribution margin ratio I 11/3+333 ? 3.-3 I 1/33+333

10). Assuming that the total fixed expenses of Taylor increase by -3H and the sales mix remains constant+ what amount of sales dollars would be necessary to generate a net operating income of 18+333C A; 1)3.+333 B; 1.0.+333 C; 10/8+333 A; 1073+333 Ans: A AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: @ard Solution: ,ach productTs contribution margin rate is :1 E !ariable expense percentage; Acdom I 1 E 3.0 I 3.. Belnom I 1 E 3.7/ I 3.1/ To calculate the weighted a!erage contribution margin+ multiply each productTs contribution margin ratio by its percentage of total sales dollars: :03H K 3..H; G :.3H K 3.1/H; I 3.). G 3.30 I 3.-3 &ew fixed expenses I :11/3+333 K 1.-3; I 118/+333 Sales dollars needed I :%ixed expenses G Target net operating income; ? Beighted a!erage contribution margin ratio I :118/+333 G 18+333; ? 3.-3 I 1073+333 Dse the following to answer 9uestions 10-410.: Aietric" Corporation produces and sells two products. Aata concerning those products for the most recent month appear below: $roduct B-)' Sales................................... 1.0+333 *ariable expenses.............. 11-+733 $roduct O7.B 1)2+333 11.+023
%ixed expenses for the entire company were 1.)+//3.
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10-. The brea"4e!en point for the entire company is closest to: A; 1.)+//3 B; 121+3)3 C; 108+2/. A; 1-3+./3 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy Solution: Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... $roduct B-)' 1.0+333 1-+733 1-)+)33 $roduct O7.B 1)2+333 1.+023 11)+--3 Total 12-+333 )7+.23 ..+/-3 .)+//3 1 1+873
O!erall C( ratio I Total contribution marginFTotal sales I 1..+/-3F12-+333 I 3.01 Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1.)+//3F3.01 I 108+2/. :rounded; 10.. #f the sales mix were to shift toward $roduct B-)' with total sales remaining constant+ the o!erall brea"4e!en point for the entire company: A; could increase or decrease. B; would decrease. C; would not change. A; would increase. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: (edium Dse the following to answer 9uestions 10/4100: #ngrum Corporation produces and sells two products. #n the most recent month+ $roduct -7T had sales of 1)3+333 and !ariable expenses of 12+.33. $roduct S37S had sales of 1-8+333 and !ariable expenses of 10+123. And the fixed expenses of the entire company were 1.1+103.

10/. The brea"4e!en point for the entire company is closest to: A; 1.1+103 B; 112+7.3 C; 1/-+.// A; 1/.+2-3 Ans: C AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: ,asy Solution: Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... $roduct -7T 1)3+333 2+.33 11)+033 $roduct S37S 1-8+333 0+123 1-)+7-3 Total 1/8+333 1-+/23 ./+.-3 .1+103 1 .+)23
O!erall C( ratio I Total contribution marginFTotal sales I 1./+.-3F1/8+333 I 3.22 Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1.1+103F3.22 I 1/-+.// :rounded; 100. #f the sales mix were to shift toward $roduct -7T with total sales remaining constant+ the o!erall brea"4e!en point for the entire company: A; would not change. B; would increase. C; would decrease. A; could increase or decrease. Ans: B AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting 'O: 8 'e!el: (edium
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Essay Questions 102. The following is Ar"adia CorporationLs contribution format income statement for last month: Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... 11+)33+33 3 733+333 .33+333 -33+333 1 133+333
The company has no beginning or ending in!entories and produced and sold )3+333 units during the month. e9uired: a. b. c. d. Bhat is the companyLs contribution margin ratioC Bhat is the companyLs brea"4e!en in unitsC #f sales increase by 133 units+ by how much should net operating income increaseC @ow many units would the company ha!e to sell to attain target profits of 11)/+333C e. Bhat is the companyLs margin of safety in dollarsC f. Bhat is the companyLs degree of operating le!erageC

Ans: a. Contribution margin ratio: C( ratio I Contribution margin ? Sales I 1.33+333 ? 11+)33+333 I 3.--b. Brea"4e!en units: Selling price :11+)33+333 ? )3+333 units; I 103 per unit *ariable expenses :1733+333 ? )3+333 units; I 1.3 per unit Sales I *ariable expenses G %ixed expenses G $rofit 103< I 1.3< G 1-33+333 G 13 1)3< I 1-33+333 < I 1-33+333 ? 1)3 per unit I 1/+333 units c. #ncrease in net operating income from additional sales of 133 units: Selling price............................................... 103 per unit *ariable expenses...................................... 1.3 per unit Dnit contribution margin........................... 1)3 per unit Additional sales......................................... K 133 units #ncrease in net operating income............... 1)+333 d. Sales to attain target profit: Sales I *ariable expenses G %ixed expenses G $rofit 103< I 1.3< G 1-33+333 G 11)/+333 1)3< I 1.)/+333 < I 1.)/+333 ? 1)3 per unit I )1+)/3 units e. (argin of safety in dollars: Brea"4e!en sales I 103 per unit K 1/+333 units I 1833+333 (argin of safety in dollars I Sales E Brea"4e!en sales I 11+)33+333 E 1833+333 I 1-33+333 f. Aegree of operating le!erage I Contribution margin ? &et operating income I 1.33+333 ? 1133+333 I ..3 AACSB: Analytic 'O: 16 -6 /6 06 26 7 A#C$A BB: Critical Thin"ing 'e!el: ,asy A#C$A %&: eporting
6-111
107. The Marry CorporationLs most recent contribution format income statement is shown below: Total $er unit 1))/+33 3 11/ 1-/+333 8 83+333 10 -/+333 1 //+333
Sales :1/+333 units;....................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... e9uired:
$repare a new contribution format income statement under each of the following conditions :consider each case independently;: a. The sales !olume increases by 13H and the price decreases by 13./3 per unit. b. The selling price decreases 11.33 per unit+ fixed expenses increase by 11/+333+ and the sales !olume decreases by /H. c. The selling price increases by )/H+ !ariable expense increases by 13.2/ per unit+ and the sales !olume decreases by 1/H. d. The selling price increases by 11./3 per unit+ !ariable cost increases by 11.33 per unit+ fixed expenses decrease by 11/+333+ and sales !olume decreases by 1)H.

Ans: a. Total $er unit *olume............................ 10+/33 units Sales................................ 1)-8+)/3 11../3 *ariable expenses............ 1.7+/33 8.33 Contribution margin........ 83+2/3 1 /./3 %ixed expenses................ -/+333 &et operating income...... 1 //+2/3 Total $er unit 1.+)/3 units 1188+/33 11..33 1)7+)/3 8.33 21+)/3 1 /.33 /3+333 1 )1+)/3 Total $er unit 1)+2/3 units 1)-8+30- 117.2/ 1).+-18.2/ 11.+2/3 18.33 -/+333 128+2/3
b . *olume............................ Sales................................ *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... c. *olume............................ Sales................................ *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... d .
Total $er unit *olume............................ 1-+)33 units Sales................................ 1)12+733 110./3 *ariable expenses........... 1-)+333 13.33 Contribution margin........ 7/+733 1 0./3 %ixed expenses................ )3+333 &et operating income...... 1 0/+733 A#C$A %&: (easurement
AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 16 . 'e!el: ,asy
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108. (cCon"ey Corporation produces and sells a single product. The companyLs contribution format income statement for July appears below: Sales :/+/33 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... e9uired: edo the companyLs contribution format income statement assuming that the company sells /+733 units. Ans: Sales :/+733 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1-22+33 3 ).8+.33 1)2+033 13)+)33 1 )/+.33 A#C$A %&: (easurement 1-/2+/3 3 )-0+/33 1)1+333 13)+)33 1 17+733
AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 1 'e!el: ,asy

123. Miannini #nc.+ which produces and sells a single product+ has pro!ided the following contribution format income statement for (arch: Sales :/+833 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... e9uired: edo the companyLs contribution format income statement assuming that the company sells /+/33 units. Ans: Sales :/+/33 units;............. *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... 1../+/3 3 18)+/33 )/-+333 183+733 1 0)+)33 A#C$A %&: (easurement 1.22+83 3 )30+/33 )21+.33 183+733 1 73+033
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121. (echem Corporation produces and sells a single product. #n April+ the company sold )+133 units. #ts total sales were 1)3/+733+ its total !ariable expenses were 1132+133+ and its total fixed expenses were 17)+.33. e9uired: a. Construct the companyLs contribution format income statement for April in good form. b. edo the companyLs contribution format income statement assuming that the company sells )+)33 units. Ans: a. Sales :)+133 units;........... *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... b . Sales :)+)33 units;........... *ariable expenses........... Contribution margin........ %ixed expenses................ &et operating income...... 1)3/+73 3 132+133 87+233 7)+.33 1 10+-33 1)1/+03 3 11)+)33 13-+.33 7)+.33 1 )1+333 A#C$A %&: (easurement

12). #n July+ (eers Corporation sold -+233 units of its only product. #ts total sales were 1132+-33+ its total !ariable expenses were 100+033+ and its total fixed expenses were 1-.+733. e9uired: a. Construct the companyLs contribution format income statement for July in good form. b. edo the companyLs contribution format income statement assuming that the company sells -+.33 units. Ans: a. Sales :-+233 units;........... *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... b . Sales :-+.33 units;........... *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... 1132+-3 3 00+033 .3+233 -.+733 1 /+833 187+03 3 01+)33 -2+.33 -.+733 1 )+033 A#C$A %&: (easurement
6-117
12-. Spencer CompanyLs most recent monthly contribution format income statement is gi!en below: Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating loss.............. 103+333 ./+333 1/+333 17+333 :1-+333;
The company sells its only product for 113 per unit. There were no beginning or ending in!entories. e9uired: a. b. c. d. Bhat are total sales in dollars at the brea"4e!en pointC Bhat are total !ariable expenses at the brea"4e!en pointC Bhat is the companyLs contribution margin ratioC #f unit sales were increased by 13H and fixed expenses were reduced by 1)+333+ what would be the companyLs expected net operating incomeC :$repare a new income statement.;
Ans: a. The contribution margin ratio is 11/+333 ? 103+333 I )/H. Therefore+ the brea"4 e!en in sales dollars is 117+333 ? )/H I 12)+333. b. The !ariable cost ratio is 1./+333 ? 103+333 I 2/H. Therefore+ the !ariable expenses at the brea"4e!en point are 12)+333 K 2/H I 1/.+333. c. )/H See part :a; abo!e. d . Sales :103+333 K 1.1;.............................. *ariable expenses :1./+333 K 1.1;......... Contribution margin................................ %ixed expenses :117+333 E 1)+333;........ &et operating income.............................. 100+33 3 .8+/33 10+/33 10+333 1/33 A#C$A %&: eporting
AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: -6 .6 / 'e!el: (edium

12.. Sarratt CorporationLs contribution margin ratio is 0)H and its fixed monthly expenses are 181+333. Assume that the companyLs sales for (ay are expected to be 118-+333. e9uired: ,stimate the companyLs net operating income for (ay. Assume that the fixed monthly expenses do not change. Show your wor"U Ans: Sales.................................................................................... Contribution margin ratio.................................................... Contribution margin :sales K contribution margin ratio;.... %ixed expenses.................................................................... &et operating income.......................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: - 'e!el: ,asy 118-+33 3 0)H 1118+00 3 81+333 1 )7+00 3 eporting
A#C$A %&:
12/. The management of (er"lin Corporation expects sales in (ay to be 113/+333. The companyLs contribution margin ratio is 23H and its fixed monthly expenses are 1.7+333. e9uired: ,stimate the companyLs net operating income for (ay. Assume that the fixed monthly expenses do not change. Show your wor"U Ans: Sales...................................................................................... Contribution margin ratio..................................................... Contribution margin :sales K contribution margin ratio;...... %ixed expenses...................................................................... &et operating income............................................................ AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: - 'e!el: ,asy
113/+33 3 23H 12-+/33 .7+333 1)/+/33 eporting
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120. @uitron #nc. expects its sales in September to be 11.-+333. The companyLs contribution margin ratio is 0/H and its fixed monthly expenses are 10)+333. e9uired: ,stimate the companyLs net operating income for September. Assume that the fixed monthly expenses do not change. Show your wor"U Ans: Sales......................................................................................... Contribution margin ratio........................................................ Contribution margin :sales K contribution margin ratio;......... %ixed expenses......................................................................... &et operating income............................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: - 'e!el: ,asy A#C$A %&: 11.-+33 3 0/H 18)+8/3 0)+333 1-3+8/3 eporting

122. Belli4$itt+ #nc+ produces a single product. The results of the companyLs operations for a typical month are summari5ed in contribution format as follows: Sales................................... *ariable expenses.............. Contribution margin........... %ixed expenses................... &et operating income......... 1/.3+33 3 -03+333 173+333 1)3+333 1 03+333
The company produced and sold 1)3+333 "ilograms of product during the month. There were no beginning or ending in!entories. e9uired: a. Mi!en the present situation+ compute 1. The brea"4e!en sales in "ilograms. ). The brea"4e!en sales in dollars. -. The sales in "ilograms that would be re9uired to produce net operating income of 183+333. .. The margin of safety in dollars. b. An important part of processing is performed by a machine that is currently being leased for 1)3+333 per month. Belli4$itt has been offered an arrangement whereby it would pay 13.13 royalty per "ilogram processed by the machine rather than the monthly lease. 1. Should the company choose the lease or the royalty planC ). Dnder the royalty plan compute brea"4e!en point in "ilograms. -. Dnder the royalty plan compute brea"4e!en point in dollars. .. Dnder the royalty plan determine the sales in "ilograms that would be re9uired to produce net operating income of 183+333. Ans: a. Sales................................ *ariable expense............. Contribution margin........ $er "g. 1../3 -.33 11./3 133.3 H 00.2H --.-H
1. Sales I *ariable expenses G %ixed expenses G Target profit 1../3< I 1-.33< G 11)3+333 G 13
Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 6-1"1
11./3< I 11)3+333 < I 11)3+333 ? 11./3 per unit I 73+333 units

). 73+333 units K 1../3 per unit I 1-03+333
-. Sales I *ariable expenses G %ixed expenses G Target profit 1../3< I 1-.33< G 11)3+333 G 183+333 11./3< I 1)13+333 < I 1)13+333 ? 11./3 per unit I 1.3+333 units .. (argin of safety I Sales E Sales at brea"e!en I 1/.3+333 E 1-03+333 I 1173+333 b. 1 . Sales................................ *ariable expense............. Contribution margin........ %ixed expense.................. &et operating income...... As #s $er Dnit Amount 1/.3+33 3 1../3 -03+333 -.33 173+333 1./3 1)3+333 1.33 1 03+333 13./3 $roposed $er Dnit Amount 1/.3+33 3 1../3 -2)+333 -.13 107+333 1..3 133+333 3.71 07+333 13./2
Since net operating income increases by 17+333 the royalty is a good plan+ pro!ided sales remains at the same le!el. ). Sales I *ariable expenses G %ixed expenses G Target profit 1../3< I 1-.13< G 1133+333 G 13 11..3< I 1133+333 < I 1133+333 ? 11..3 per unit I 21+.)8 units -. 21+.)8 units K 1../3 unit I 1-)1+.)8
.. Sales I *ariable expenses G %ixed expenses G Target profit 1../3< I 1-.13< G 1133+333 G 183+333 11..3< I 1183+333 < I 1183+333 ? 11..3 per unit I 1-/+21. units AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: .6 /6 0 'e!el: (edium A#C$A %&: eporting
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127. Shelhorse Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 11.3 *ariable expenses.............. /0 Contribution margin.......... 1 7. $ercent of Sales 133H .3H 03H
%ixed expenses are 1)2/+333 per month. The company is currently selling .+333 units per month. e9uired: The mar"eting manager belie!es that a 11-+333 increase in the monthly ad!ertising budget would result in a 1/3 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U Ans: #ncrease in total contribution margin :17. per unit K 1/3 units;... 'ess incremental fixed expenses................................................... Change in net operating income.................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 11)+033 1-+333 :1 .33; eporting
128. Aata concerning Ca!alu55i CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 1113 .. 1 00 $ercent of Sales 133H .3H 03H
%ixed expenses are 1..3+333 per month. The company is currently selling 7+333 units per month. e9uired: The mar"eting manager belie!es that a 17+333 increase in the monthly ad!ertising budget would result in a 1/3 unit increase in monthly sales. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U

Ans: #ncrease in total contribution margin :100 per unit K 1/3 units;......... 'ess incremental fixed expenses......................................................... Change in net operating income.......................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 18+83 3 7+333 11+83 3
eporting
173. &aumann Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 1133 *ariable expenses.............. -3 Contribution margin.......... 1 23 $ercent of Sales 133H -3H 23H
%ixed expenses are 1)-.+333 per month. The company is currently selling .+333 units per month. e9uired: (anagement is considering using a new component that would increase the unit !ariable cost by 12. Since the new component would impro!e the companyTs product+ the mar"eting manager predicts that monthly sales would increase by /33 units. Bhat should be the o!erall effect on the companyTs monthly net operating income of this change if fixed expenses are unaffectedC Show your wor"U Ans: &ew !ariable cost per unit :1-3 G 12;........................................... &ew contribution margin per unit :1133 E 1-2;............................ &ew unit monthly sales :.+333 units G /33 units;......................... &ew total contribution margin: .+/33 units K 10- per unit........... Current total contribution margin: .+333 units K 123 per unit....... Change in total contribution margin and in net operating income 1-2 10.+/33 1)7-+/3 3 )73+333 1 -+/33
Since fixed expenses are not affected by this change+ the change in net operating income will be e9ual to the change in total contribution margin.
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AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy
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eporting

171. Aata concerning (ilian CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 11-3 -8 1 81 $ercent of Sales 133H -3H 23H
%ixed expenses are 100+333 per month. The company is currently selling 1+333 units per month. e9uired: (anagement is considering using a new component that would increase the unit !ariable cost by 11/. Since the new component would impro!e the companyLs product+ the mar"eting manager predicts that monthly sales would increase by )33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this change if fixed expenses are unaffectedC Show your wor"U Ans: &ew !ariable cost per unit :1-8 G 11/;.............................................. &ew contribution margin per unit :11-3 E 1/.;................................ &ew unit monthly sales :1+333 units G )33 units;............................. &ew total contribution margin: 1+)33 units K 120 per unit................ Current total contribution margin: 1+333 units K 181 per unit........... Change in total contribution margin and in net operating income..... 1/. 120 1+)33 181+)3 3 81+333 1 )33
Since fixed expenses are not affected by this change+ the change in net operating income will be e9ual to the change in total contribution margin. AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: eporting
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17). Bethard Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 11)3 *ariable expenses.............. ). Contribution margin.......... 1 80 $ercent of Sales 133H )3H 73H
%ixed expenses are 1-/.+333 per month. The company is currently selling /+333 units per month. e9uired: The mar"eting manager would li"e to cut the selling price by 17 and increase the ad!ertising budget by 1)-+333 per month. The mar"eting manager predicts that these two changes would increase monthly sales by 033 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U Ans: &ew selling price :11)3 E 17;................................................... &ew contribution margin :111) E 1).;.................................... &ew unit monthly sales :/+333 units G 033 units;.................... &ew total contribution margin: /+033 units K 177 per unit....... $resent total contribution margin: /+333 units K 180 per unit. . Change in total contribution margin......................................... 'ess increase in ad!ertising budget........................................... Change in net operating income................................................ AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 111) 177 /+033 1.8)+733 .73+333 1)+733 )-+333 :113+)33; eporting

17-. Aata concerning &euner CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 1))3 77 11-) $ercent of Sales 133H .3H 03H
%ixed expenses are 1.)/+333 per month. The company is currently selling .+333 units per month. e9uired: The mar"eting manager would li"e to cut the selling price by 111 and increase the ad!ertising budget by 1)-+233 per month. The mar"eting manager predicts that these two changes would increase monthly sales by .33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U Ans: &ew selling price :1))3 E 111;....................................................... &ew contribution margin :1)38 E 177;.......................................... &ew unit monthly sales :.+333 units G .33 units;.......................... &ew total contribution margin: .+.33 units K 11)1 per unit........... $resent total contribution margin: .+333 units K 11-) per unit...... Change in total contribution margin............................................... 'ess increase in ad!ertising budget................................................. Change in net operating income...................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 1)38 11)1 .+.33 1/-)+.33 /)7+333 .+.33 )-+233 :118+-33; eporting
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17.. @amiel Corporation produces and sells a single product. Aata concerning that product appear below: $er Dnit Selling price....................... 1).3 *ariable expenses.............. 107 Contribution margin.......... 12) $ercent of Sales 133H 23H -3H
%ixed expenses are 1-31+333 per month. The company is currently selling /+333 units per month. e9uired: The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 110 per unit. #n exchange+ the sales staff would accept an o!erall decrease in their salaries of 107+333 per month. The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by )33 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U Ans: &ew contribution margin :12) E 110;......................................... &ew unit monthly sales :/+333 units G )33 units;....................... &ew total contribution margin: /+)33 units K 1/0 per unit.......... $resent total contribution margin: /+333 units K 12) per unit..... Change in total contribution margin............................................ $lus sa!ings in salespersonsT salaries.......................................... Change in net operating income................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 1/0 /+)33 1)81+)33 -03+333 :07+733; 07+333 :1 733; eporting

17/. Aata concerning Bisloc"i CorporationLs single product appear below: Selling price....................... *ariable expenses.............. Contribution margin.......... $er Dnit 11-3 )0 113. $ercent of Sales 133H )3H 73H
%ixed expenses are 1.00+333 per month. The company is currently selling 0+333 units per month. e9uired: The mar"eting manager would li"e to introduce sales commissions as an incenti!e for the sales staff. The mar"eting manager has proposed a commission of 111 per unit. #n exchange+ the sales staff would accept an o!erall decrease in their salaries of 1//+333 per month. The mar"eting manager predicts that introducing this sales incenti!e would increase monthly sales by 133 units. Bhat should be the o!erall effect on the companyLs monthly net operating income of this changeC Show your wor"U Ans: &ew contribution margin :113. E 111;....................................... &ew unit monthly sales :0+333 units G 133 units;....................... &ew total contribution margin: 0+133 units K 18- per unit.......... $resent total contribution margin: 0+333 units K 113. per unit. . . Change in total contribution margin............................................ $lus sa!ings in salespersonsT salaries.......................................... Change in net operating income................................................... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: . 'e!el: ,asy A#C$A %&: 180+133 1/02+-33 0).+333 :/0+233; //+333 :1 1+233; eporting
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170. (erlin ,nterprises manufactures a cellular telephone. The companyLs partial contribution format income statement for the most recent year is below. Total $er Dnit 1-33+33 3 103 137+333 atio //H
Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... e9uired:
a. Complete the contribution income statement abo!e. b. Aetermine the brea"e!en sales and units using either the e9uation or the contribution approach. c. Aetermine the sales necessary to earn a profit of 1/.+333. d. Aetermine the margin of safety percentage for the year abo!e. Ans: a. *ariable expenses I 3.// K 1-33+333 I 110/+333 *ariable expenses per unit I 3.// K 103 I 1-Total $er Dnit atio 1-33+33 3 103 133H 10/+333 -//H 1-/+333 1)2 ./H 137+333 1 )2+333
Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income.........
b. Brea"4e!en in unit sales I 1137+333F1)2 per unit I .+333 units Brea"4e!en in dollar sales I 1137+333F3../ I 1).3+333 c. Aollar sales to attain target profit I :1137+333 G 1/.+333;F3../ I 1-03+333 d. (argin of safety I 1-33+333 E 1).3+333 I 103+333 (argin of safety percentage I 103+333F1-33+333 I )3H AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: /6 06 2 'e!el: ,asy A#C$A %&: eporting

172. %risch Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit.......... *ariable expense per unit. . %ixed expense per month... e9uired: Aetermine the monthly brea"4e!en in either unit or total dollar sales. Show your wor"U Ans: Selling price per unit............................................................... *ariable expense per unit........................................................ Contribution margin per unit and contribution margin ratio... $er Dnit 1123.33 7-.-3 1 70.23 $ercent of Sales 133H .8H /1H 1123.33 17-.-3 11-7+2) 3
Brea"4e!en in unit sales I %ixed expensesFDnit contribution margin I 11-7+2)3F170.23 I 1+033 Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 11-7+2)3F3./1 I 1)2)+333 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: / 'e!el: ,asy A#C$A %&: eporting
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177. @amerni"+ #nc.+ produces and sells a single product whose selling price is 1).3.33 per unit and whose !ariable expense is 12).33 per unit. The companyLs fixed expense is 1-2)+803 per month. e9uired: Aetermine the monthly brea"4e!en in either unit or total dollar sales. Show your wor"U Ans: Selling price per unit............................................................... *ariable expense per unit........................................................ Contribution margin per unit and contribution margin ratio... $er Dnit 1).3.33 2).33 1107.33 $ercent of Sales 133H -3H 23H
Brea"4e!en in unit sales I %ixed expensesFDnit contribution margin I 1-2)+803F1107 I )+))3 Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 1-2)+803F3.23 I 1/-)+733 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: / 'e!el: ,asy A#C$A %&: eporting

178. Pama"awa Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... e9uired: Aetermine the monthly brea"4e!en in unit sales. Show your wor"U Ans: Selling price per unit...................... *ariable expense per unit.............. Contribution margin per unit......... 1)33.3 3 0..33 11-0.3 3 1)33.33 10..33 1023+.7 3
Brea"4e!en in unit sales I %ixed expensesFDnit contribution margin I 1023+.73F11-0 I .+8-3 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: / 'e!el: ,asy A#C$A %&: eporting
183. 'i5+ #nc.+ produces and sells a single product. The product sells for 11-3.33 per unit and its !ariable expense is 1.7.13 per unit. The companyLs monthly fixed expense is 1))-+/72. e9uired: Aetermine the monthly brea"4e!en in unit sales. Show your wor"U Ans: Selling price per unit...................... *ariable expense per unit.............. Contribution margin per unit......... 11-3.3 3 .7.13 1 71.83
Brea"4e!en in unit sales I %ixed expensesFDnit contribution margin I 1))-+/72F171.83 I )+2-3

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 6-1 !
AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: / 'e!el: ,asy
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eporting

181. Cleghorn Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... e9uired: Aetermine the monthly brea"4e!en in total dollar sales. Show your wor"U Ans: Selling price per unit................................................................ *ariable expense per unit........................................................ Contribution margin per unit and contribution margin ratio... Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 11/-+)10F3./0 I 1)2-+033 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: / 'e!el: ,asy A#C$A %&: eporting $er $ercent of Dnit Sales 1103.33 133H 23..3 ..H 1 78.03 /0H 1103.33 123..3 11/-+)1 0
18). (alense" #nternational+ #nc.+ produces and sells a single product. The product sells for 1).3.33 per unit and its !ariable expense is 1//.)3 per unit. The companyLs monthly fixed expense is 1).8+.73. e9uired: Aetermine the monthly brea"4e!en in total dollar sales. Show your wor"U Ans: Selling price per unit................................................................ *ariable expense per unit........................................................ Contribution margin per unit and contribution margin ratio... Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 1).8+.73F3.22 I 1-).+333 AACSB: Analytic A#C$A BB: Critical Thin"ing A#C$A %&: eporting
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$er $ercent of Dnit Sales 1).3.33 133H //.)3 )-H 117..73 22H
'O: /
'e!el: ,asy

18-. Brihon Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... e9uired: a. Assume the companyLs monthly target profit is 11)+0/3. Aetermine the unit sales to attain that target profit. Show your wor"U b. Assume the companyLs monthly target profit is 10-+)/3. Aetermine the dollar sales to attain that target profit. Show your wor"U Ans: Selling price per unit........................................... *ariable expense per unit................................... Contribution margin per unit and C( ratio........ $er Dnit $ercent of Sales 1)-3.33 133H 13-./3 ./H 11)0./3 //H 1)-3.33 113-./3 1/17+0/ 3
a. Dnit sales to attain target profit I :%ixed expenses G Target profit;FDnit contribution margin I :1/17+0/3 G 11)+0/3;F11)0./3 I .+)33 b. Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1/17+0/3 G 10-+)/3;F3.// I 11+3/7+333 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting
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18..
achal Corporation produces and sells a single product whose selling price is 11/3.33 per unit and whose !ariable expense is 1/2.33 per unit. The companyLs monthly fixed expense is 1-71+-33. e9uired: a. Assume the companyLs monthly target profit is 18+-33. Aetermine the unit sales to attain that target profit. Show your wor"U b. Assume the companyLs monthly target profit is 117+033. Aetermine the dollar sales to attain that target profit. Show your wor"U Ans: Selling price per unit........................................... *ariable expense per unit................................... Contribution margin per unit and C( ratio........ $er Dnit $ercent of Sales 11/3.33 133H /2.33 -7H 1 8-.33 0)H
a. Dnit sales to attain target profit I :%ixed expenses G Target profit;FDnit contribution margin I :1-71+-33 G 18+-33;F18-.33 I .+)33 b. Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1-71+-33 G 117+033;F3.0) I 10./+333 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting

18/. @aw!er Corporation produces and sells a single product. Aata concerning that product appear below: Selling price per unit...................... *ariable expense per unit.............. %ixed expense per month............... e9uired: Assume the companyLs monthly target profit is 118+733. Aetermine the unit sales to attain that target profit. Show your wor"U Ans: Selling price per unit...................... *ariable expense per unit.............. Contribution margin per unit......... 1173.3 3 71.33 1 88.33 1173.33 171.33 1/8.+33 3
Dnit sales to attain target profit I :%ixed expenses G Target profit;FDnit contribution margin I :1/8.+333 G 118+733;F188.33 I 0+)33 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting
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180. The selling price of Old CorporationLs only product is 1173.33 per unit and its !ariable expense is 1-2.73 per unit. The companyLs monthly fixed expense is 1.7-+.73. e9uired: Assume the companyLs monthly target profit is 1/0+773. Aetermine the unit sales to attain that target profit. Show your wor"U Ans: Selling price per unit...................... *ariable expense per unit.............. Contribution margin per unit......... 1173.3 3 -2.7 3 11.).) 3
Dnit sales to attain target profit I :%ixed expenses G Target profit;FDnit contribution margin I :1.7-+.73 G 1/0+773;F11.).)3 I -+733 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting
182. Bussy Corporation produces and sells a single product whose contribution margin ratio is /.H. The companyLs monthly fixed expense is 1/01+033 and the companyLs monthly target profit is 1-.+/03. e9uired: Aetermine the dollar sales to attain the companyLs target profit. Show your wor"U Ans: Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1/01+033 G 1-.+/03;F3./. I 11+13.+333 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting

187. The contribution margin ratio of Ouc" CorporationLs only product is 2/H. The companyLs monthly fixed expense is 1/7/+333 and the companyLs monthly target profit is 111+)/3. e9uired: Aetermine the dollar sales to attain the companyLs target profit. Show your wor"U Ans: Total sales dollars to attain target profit I :%ixed expenses G Target profit;FC( ratio I :1/7/+333 G 111+)/3;F3.2/ I 128/+333 AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 0 'e!el: ,asy A#C$A %&: eporting
188. One5e!ich Corporation ma"es a product that sells for 1)-3 per unit. The productLs current sales are -0+833 units and its brea"4e!en sales are -)+13- units. e9uired: Compute the margin of safety in both dollars and as a percentage of sales. Ans: Sales :at the current !olume of -0+833 units; :a;............ Brea"4e!en sales :at -)+13- units;................................... (argin of safety :in dollars; :b;...................................... (argin of safety as a percentage of sales+ :b; ? :a;......... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 2 'e!el: ,asy 17+.72+33 3 2+-7-+083 11+13-+-1 3 1-H eporting
A#C$A %&:
6-1#
)33. Aic"us CorporationLs only product sells for 1133 per unit. #ts current sales are -/+033 units and its brea"4e!en sales are )8+18) units. e9uired: Compute the margin of safety in both dollars and as a percentage of sales. Ans: Sales :at the current !olume of -/+033 units; :a;............ Brea"4e!en sales :at )8+18) units;................................... (argin of safety :in dollars; :b;...................................... (argin of safety as a percentage of sales+ :b; ? :a;......... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 2 'e!el: ,asy 1-+/03+33 3 )+818+)33 1 0.3+733 17H eporting
A#C$A %&:
)31. @aslem #nc. has pro!ided the following data concerning its only product: Selling price....................... 1133 per unit Current sales...................... -2+-33 units Brea"4e!en sales................ )0+.7- units e9uired: Compute the margin of safety in both dollars and as a percentage of sales. Ans: Sales :at the current !olume of -2+-33 units; :a;............ Brea"4e!en sales :at )0+.7- units;................................... (argin of safety :in dollars; :b;...................................... (argin of safety as a percentage of sales+ :b; ? :a;......... AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 2 'e!el: ,asy 1-+2-3+33 3 )+0.7+-33 11+371+23 3 )8H eporting
A#C$A %&:

)3). (c9uage Corporation has pro!ided its contribution format income statement for July. Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses............................... &et operating income..................... e9uired: a. Compute the degree of operating le!erage to two decimal places. b. Dsing the degree of operating le!erage+ estimate the percentage change in net operating income that should result from a 18H increase in sales. Ans: a. Aegree of operating le!erage I Contribution marginF&et operating income I 1)/1+133F1.1+-33 I 0.37 b. $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 18H K 0.37 I 11/./)H AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 7 'e!el: ,asy A#C$A %&: eporting 1//7+33 3 -30+833 )/1+133 )38+733 1 .1+-33
6-1#!
)3-. 'ub"e CorporationLs contribution format income statement for the most recent month follows: Sales................................... *ariable expenses.............. Contribution margin.......... %ixed expenses................... &et operating income......... e9uired: a. Compute the degree of operating le!erage to two decimal places. b. Dsing the degree of operating le!erage+ estimate the percentage change in net operating income that should result from a -H increase in sales. Ans: a. Aegree of operating le!erage I Contribution marginF&et operating income I 1)08+/33F1)2+733 I 8.08 b. $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I -H K 8.08 I )8.32H AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 7 'e!el: ,asy A#C$A %&: eporting 1/30+33 3 )-0+/33 )08+/33 ).1+233 1 )2+733

)3.. #n the most recent month+ Sardella CorporationLs total contribution margin was 1.0+)33 and its net operating income 11-+)33. e9uired: a. Compute the degree of operating le!erage to two decimal places. b. Dsing the degree of operating le!erage+ estimate the percentage change in net operating income that should result from a 13H increase in sales. Ans: a. Aegree of operating le!erage I Contribution marginF&et operating income I 1.0+)33F11-+)33 I -./3 b. $ercent increase in net operating income I $ercent increase in sales K Aegree of operating le!erage I 13H K -./3 I -/.33H AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 7 'e!el: ,asy A#C$A %&: eporting
6-1#7
)3/. Brancati #nc. produces and sells two products. Aata concerning those products for the most recent month appear below: $roduct B32C $roduct B)8R Sales................................... 1)/+333 1)2+333 *ariable expenses.............. 12+333 17+033 %ixed expenses for the entire company were 1-)+703. e9uired: a. Aetermine the o!erall brea"4e!en point for the company. Show your wor"U b. #f the sales mix shifts toward $roduct B32C with no change in total sales+ what will happen to the brea"4e!en point for the companyC ,xplain. Ans: a. Sales................................ *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... $roduct B32C $roduct B)8R 1)/+333 2+333 117+333 1)2+333 7+033 117+.33 Total 1/)+33 3 1/+033 -0+.33 -)+703 1 -+/.3
O!erall C( ratio I Total contribution marginFTotal sales I 1-0+.33F1/)+333 I 3.23 Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1-)+703F3.23 I 1.0+8.b . Sales :a;........................... Contribution margin :b;. . C( ratio :b;?:a;.............. $roduct B32C $roduct B)8R 1)/+333 1)2+333 117+333 117+.33 3.2)3 3.071
Since $roduct B32CTs C( ratio is greater than $roduct B)8RTs+ a shift in the sales mix toward $roduct B32C will result in a decrease in the companyTs o!erall brea"4 e!en point. AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 8 'e!el: ,asy A#C$A %&: eporting

)30. *eren #nc. produces and sells two products. Auring the most recent month+ $roduct %2-ALs sales were 1)2+333 and its !ariable expenses were 18+./3. $roduct '2/$Ls sales were 11.+333 and its !ariable expenses were 1/+-13. The companyLs fixed expenses were 1)1+303. e9uired: a. Aetermine the o!erall brea"4e!en point for the company. Show your wor"U b. #f the sales mix shifts toward $roduct %2-A with no change in total sales+ what will happen to the brea"4e!en point for the companyC ,xplain. Ans: a. Sales................................ *ariable expenses............ Contribution margin........ %ixed expenses................ &et operating income...... $roduct %2-A $roduct '2/$ 1)2+333 8+./3 112+//3 11.+333 /+-13 1 7+083 Total 1.1+33 3 1.+203 )0+).3 )1+303 1 /+173
O!erall C( ratio I Total contribution marginFTotal sales I 1)0+).3F1.1+333 I 3.0. Brea"4e!en point in total sales dollars I %ixed expensesFO!erall C( ratio I 1)1+303F3.0. I 1-)+830 b . Sales :a;........................... Contribution margin :b;. . C( ratio :b;?:a;.............. $roduct %2-A $roduct '2/$ 1)2+333 11.+333 112+//3 17+083 3.0/3 3.0)1
Since $roduct %2-ATs C( ratio is greater than $roduct '2/$Ts+ a shift in the sales mix toward $roduct %2-A will result in a decrease in the companyTs o!erall brea"4e!en point. AACSB: Analytic A#C$A BB: Critical Thin"ing 'O: 8 'e!el: ,asy A#C$A %&: eporting
6-1#9

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True/False Questions 1.

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

#ncrease in net operating income: 1122+103 4 1122+333 I 1103

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

#ncrease in net operating income: 1/1+)73 4 1.8+333 I 1)+)73

#ncrease in net operating income: 1-3+033 4 1)/+333 I 1/+033

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

#ncrease in net operating income: 1188+333 4 118-+333 I 10+333

Aecrease in net operating income: 1138+333 4 181+333 I 117+333

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Aecrease in net operating income: 101+333 4 1/)+133 I 17+833

#ncrease in net operating income: 11)-+/33 4 180+333 I 1)2+/33

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

#ncrease in net operating income: 1)//+033 4 1).1+333 I 11.+033

#ncrease in net operating income: 18+88/ 4 18+3/3 I 18./

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Brea"4e!en in total sales dollars I %ixed expensesFC( ratio I 187+333F3./8/ I 110.+23/.77

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales................................... *ariable expenses..............

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales................................... *ariable expenses..............

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales in dollars............................... Contribution margin ratio..............

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales................................. *ariable expenses............. %ixed expenses.................

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales in dollars............................... Contribution margin ratio..............

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales......................................................................... *ariable expenses..................................................... Contribution margin and contribution margin ratio.

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Sales............................................... *ariable expenses.......................... Contribution margin...................... %ixed expenses...............................

#ncrease in net operating income: 187+233 E 187+333 I 1233

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Aecrease in net operating income: 187+333 E 18/+833 I 1)+133

Aecrease in net operating income: 187+333 E 12-+/33 I 1).+/33

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

#ncrease in net operating income: 1))/+/33 E 1)).+333 I 11+/33

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition