Question

The following information is available for Swifty Corporation:

Sales	$560000		Total fixed expenses	$150000
Cost of goods sold	360000		Total variable expenses	320000

A CVP income statement would report

gross profit of $200000.

contribution margin of $240000.

contribution margin of $410000.

gross profit of $240000.

Question 16

It costs Vaughn Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 4800 units at $21 each. Vaughn would incur special shipping costs of $2 per unit if the order were accepted. Vaughn has sufficient unused capacity to produce the 4800 units. If the special order is accepted, what will be the effect on net income?

$14400 increase

$4800 increase

$4800 decrease

$86400 increase

Question 14

North Division has the following information:

Sales	$1100000
Variable expenses	630000
Fixed expenses	620000

If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped?

$150000 increase

$480000 increase

$470000 decrease

$620000 decrease

Answer 1

#
Swifty
Sales	560000
(-) Total variable expenses	320000
Contribution margin	240000
Answer : Contribution margin of $240000
#
Vaughn
	Special order
Sales ( 4800 * 21 )	100800
(-) Variable cost of production ( 4800 * 18 )	86400
(-) Special shipping cost ( 4800 * 2 )	9600
Net income (loss)	4800
Answer : $4800 increase
#
North division
If the division is dropped and the fixed costs are allocated to the company's other divisions, then the company's net income will decrease by the amount of contribution margin earned from the division which is dropped
Sales	1100000
(-) Variable expenses	630000
Contribution margin	470000
Answer : $470000 decrease