CVP Analysis: Additional Issues - Sales Mix

Multiple choices

1. Sales mix is
a. the relative percentage in which a company sells its multiple products.
b. the trend of sales over recent periods.
c. the mix of variable and fixed expenses in relation to sales.
d. a measure of leverage used by the company.

2. In a sales mix situation, at any level of units sold, net income will be higher if
a. more higher contribution margin units are sold than lower contribution margin
units.
b. more lower contribution margin units are sold than higher contribution margin
units.
c. more fixed expenses are incurred.
d. weighted-average unit contribution margin decreases.
3. Ramirez Corporation sells two types of computer hard drives. The sales mix is 30%
(Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a
selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling
price of $195. The weighted-average unit contribution margin for Ramirez is
a. $69.
b. $75.
c. $81.
d. $150.

4. Capitol Manufacturing sells 4,000 units of Product A annually, and 6,000 units of
Product B annually. The sales mix for Product A is
a. 40%.
b. 60%.
c. 67%.
d. Cannot determine from information given.

5. Ramirez Corporation sells two types of computer hard drives. The sales mix is 30%
(Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a
selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling
price of $195. Ramirez’s fixed costs are $891,000. How many units of Q-Drive would
be sold at the break-even point?
a. 3,300
b. 4,455
c. 11,000
d. 7,700

Use the following information for questions 6 and 7.

Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two
products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and
60,000 Supreme. Fixed expenses are $1,800,000.

6. How many Standards would Roosevelt sell at the break-even point?

a. 24,000
b. 36,000
c. 40,000
d. 60,000
 7. At the expected sales level, Roosevelt’s net income will be
a. $(300,000).
b. $ - 0 -.
c. $1,200,000.
d. $3,000,000.
Use the following information for questions 8–11.

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is
65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed
costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is
50%.

8. The weighted-average contribution margin ratio is

a. 37%.
b. 40%.
c. 43%.
d. 50%.

9. The break-even point in dollars is

a. $2,464,200.
b. $15,488,373.
c. $16,650,000.
d. $18,000,000.

10. What will sales be for the Sporting Goods Division at the break-even point?
a. $5,400,000
b. $6,300,000
c. $10,067,442
d. $11,700,000

11. What will be the total contribution margin at the break-even point?
a. $5,730,699
b. $6,660,000
c. $6,720,000
d. $7,740,000

12. A shift from low-margin sales to high-margin sales

a. may increase net income, even though there is a decline in total units sold.
b. will always increase net income.
c. will always decrease net income.
d. will always decrease units sold.

13. A shift from high-margin sales to low-margin sales

a. may decrease net income, even though there is an increase in total units sold.
b. will always decrease net income.
c. will always increase net income.
d. will always increase units sold.
Use the following information for questions 14 and 15.
MacCloud Industries has two divisions—Standard and Premium. Each division has hundreds
of different types of tennis racquets and tennis products. The following information is
available:
Standard Division Premium Division Total
Sales $400,000 $600,000 $1,000,000
Variable costs 280,000 360,000
Contribution margin $120,000 $240,000
Total fixed costs $300,000

14. What is the weighted-average contribution margin ratio?

a. 34%
b. 35%
c. 36%
d. 50%

15. What is the break-even point in dollars?

a. $108,000
b. $833,333
c. $857,143
d. $882,353

16. The sales mix percentages for Novotna’s Boston and Seattle Divisions are 70% and
30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed
costs are $2,220,000. What is Novotna’s break-even point in dollars?
a. $777,000
b. $6,000,000
c. $6,342,856
d. $6,727,272

17. A company can sell all the units it can produce of either Product A or Product B but not
both. Product A has a unit contribution margin of $16 and takes two machine hours to
make and Product B has a unit contribution margin of $30 and takes three machine
hours to make. If there are 5,000 machine hours available to manufacture a product,
income will be
a. $10,000 more if Product A is made.
b. $10,000 less if Product B is made.
c. $10,000 less if Product A is made.
d. the same if either product is made.

18. Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not
both. Plain has a unit contribution margin of $72 and takes two machine hours to make
and Fancy has a unit contribution margin of $90 and takes three machine hours to
make. There are 2,400 machine hours available to manufacture a product. What should
Brooks do?
a. Make Fancy which creates $18 more profit per unit than Plain does.
b. Make Plain which creates $6 more profit per machine hour than Fancy does.
c. Make Plain because more units can be made and sold than Fancy.
d. The same total profits exist regardless of which product is made.

19. What is the key factor in determining sales mix if a company has limited resources?
 a. Contribution margin per unit of limited resource
b. The amount of fixed costs per unit
c. Total contribution margin
d. The cost of limited resources
20. Greg’s Breads can produce and sell only one of the following two products:
Oven Contribution
Hours Required Margin Per Unit
Muffins 0.2 $3
Coffee Cakes 0.3 $4
The company has oven capacity of 1,500 hours. How much will contribution margin
be if it produces only the most profitable product?
a. $15,000
b. $20,000
c. $22,500
d. $30,000

21. Curtis Corporation’s contribution margin is $25 per unit for Product A and $30 for
Product B. Product A requires 2 machine hours and Product B requires 4 machine
hours. How much is the contribution margin per unit of limited resource for each
product?
A B
a. $12.50 $7.50
b. $12.50 $8.33
c. $10.00 $7.50
d. $10.00 $8.33