Mossfeet Shoe Company is a single product firm. Mossfeet is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year?
Contribution Margin Ratio; Break-even Point
Detailed Answer
Correct answer: (A)
Increase; Decrease
2
The contribution margin ratio is equal to:
Detailed Answer
Correct answer: (B)
3
The contribution margin ratio always increases when the:
Detailed Answer
Correct answer: (C)
variable expenses as a percentage of net sales decrease.
4
In the middle of the year, the price of Lake Corporation’s major raw material increased by 8%. How would this increase affect the company’s break-even point and margin of safety?
Break-even point; Margin of safety
Detailed Answer
Correct answer: (B)
Increase; Decrease
5
A $2.00 increase in a product’s variable expense per unit accompanied by a $2.00 increase in its selling price per unit will:
Detailed Answer
Correct answer: (C)
have no effect on the break-even volume.
6
The break-even point in unit sales is found by dividing total fixed expenses by:
Detailed Answer
Correct answer: (D)
the contribution margin per unit.
7
Which of the following would not affect the break-even point?
Detailed Answer
Correct answer: (A)
number of units sold
8
If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:
Detailed Answer
Correct answer: (C)
not change.
9
To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?
Detailed Answer
Correct answer: (B)
(Fixed expenses + Target net profit)/Contribution margin ratio
10
Salinas Corporation has a degree of operating leverage of 8. This means that a 1% change in sales dollars at Salinas will generate an 8% change in: