College Acct 2- Chapter 6

Goodman Corporation has sales of 4,000 units at $75 per unit. Variable costs are 40% of the sales price. If total fixed costs are $70,000, the degree of operating leverage is:

• 1.85

• 0.95

• 1.10

• 1.64

The break-even point in dollar sales is closest to:

• $234,000

• $156,000

• $237,900

• $0

Which of the following factors does not influence the calculation of the break-even point?

• variable cost per unit

• total revenue

• fixed costs

• price per unit

Sales (2,000 units) $100,000

Variable expenses 72,000

Contribution margin 28,000

Fixed expenses 10,000

Net operating income 18,000

The contribution margin ratio is closest to:

• 28%

• 60%

• 67%

• 33%

Fixed expenses are $100,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $28. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change?

• increase of $33,600

• decrease of $14,000

• increase of $14,000

• decrease of $33,600

The number of units that must be sold to achieve a target profit of $50,000 is closest to:

• 11,100 units

• 7,000 units

• 42,000 units

• 35,000 units

At the break-even point:

• sales equal total variable costs.

• contribution margin equals total variable costs.

• sales equal total fixed costs.

• contribution margin equals total fixed costs.

If the degree of operating leverage is 6, then a one percent change in quantity sold should result in a 6 percent change in:

• net operating income.

• unit contribution margin.

• revenue.

• variable expense.

A soft drink bottler incurred the following factory utility cost: $3,586 for 750 cases bottled and $3,680 for 1,100 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:

• $0.27

• $3.26

• $4.78

• $3.35

What will cause the margin of safety to increase?

• Fixed expenses increase

• Sales price per unit decreases and all other factors remain constant

• Sales volume decreases and all other factors remain constant

• Sales volume increases and all other factors remain constant