Question

10.Gayne Corporation's contribution margin ratio is 12% and its fixed monthly expenses are $84.000. If the company's sales for a month are $738,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change. A) $88,560 B)$4,560 C) $565,440 D) $654,000 11.Product Y sells for $15 per unit, and has related variable expenses of $9 per unit. Fixed expenses total $300,000 per year. How many units of Product Y must be sold each year to yield an annual profit of $90,000: A) 65,000 units B) 15,000 units C) 43,333 units D) 50,000 units 12.Cubie Corporation has provided the following data concerning its only product: Selling price.... ... $100 per unit Current sales ....... .. 10,600 units Break-even sales.... .. 9,540 units What is the margin of safety in dollars? A) $106,000 B) $1,060,000 C) $706,667 D) $954,000 13.At the break-even point: A) contribution margin would be equal to fixed expenses. sales would be equal to contribution margin. C) sales would be equal to fixed expenses. D) contribution margin would be equal to net operating income. B) 14. Escareno Corporation has provided its contribution format income statement for June. The company produces and sells a single product. Sales (8,400 units) ........ $764,400 Variable expenses... 445,200 Contribution margin............... 319,200 Fixed expenses.......... 250,900 Net operating income.................... $ 68,300 If the company sells 8,200 units, its total contribution margin should be closest to: A) $66,674 B) $319,200 C) $311,600 D) $301,000 Use the following to answer questions 15-22: Abdi Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price...... $81 Units in beginning inventory ........ Units produced. Units sold......................... . .......... Units in ending inventory ......... 7,300 7,000 300

Answer 1

Ans. 10	Option B   $4,560
	Net operating ncome    =    (Sales * Contribution margin ratio) - Fixed expenses
	($738,000 * 12%) - $84,000
	$88,560 - $84,000
	$4,560
Ans. 11	Option    A    65,000 units
	*First of all, we need to calculate the contribution margin per unit for the
	computation of unit sales for target profit.
	Contribution margin per unit = Selling price per unit - Variable cost per unit
	$15 - $9   =    $6   per unit
	Unit sales for target profit   =   (Fixed expense + Target profit) / Contribution margin per unit
	($300,000 + $90,000) / $6
	$390,000 / $6
	65,000 units
Ans. 12	Option   A     $106,000
	Margin of safety in dollars = (Current sales in units - Break even sales in units) * Selling price
	(10,600 - 9,540) * $100
	1,060 * $100
	$106,000
Ans. 13	Option A
	Break even is the level of activity on which the firm does not generate profit or occur any loss.
	So, the Profit is zero which is equal to the difference of Contribution margin and fixed cost.
Ans. 14	Option C   $311,600
	Contribution margin on 8,200 units   =   Contribution margin on current level / 8,400 units * 8,200 units
	$319,200 / 8,400 * 8,200
	$311,600