EME

Cost-Volume-Profit Relationslt r,}

56. The company's overall contribution margin ratio fur the sales mix

expected is

a. 40%. C. 50%.

h. 45%. d. 60%.

Supporting Anah'sis/C'ornputation:

(55) Answer: B

Oak Chestnut fatal

CM per unit P'4 I' 60

x .Sales mix x 5 xI

Weighted ('M PIP-'V + P 60 P/SO

Breakeven Sakes P135.000

(combs nets)

P300,ooo

(56) Answer: B

1 ota! Weighted CM

Total Weighted Sales - Weighted CM rate

P180

' f4un - 45%,

57. Holt Company's variable costs are 70% of sales. At a P300,000 sales

level, the degree of operating leverage is 10. If sales increase by P60,000,

the degree of operating leverage will be

A. 12. C. 6.

b. 10. d. 4.

Answer D

Supporting 4nelysla/C'ornputatlon:

Present

10 _ 90.000 _
90.000 - F('

IOF(' 810.000

FC 8/,000

3A-27

Unit 3-A

Expected:

DOL

DOL =

Situational

360,000 x 3016

(360.000 x 30%) - 81,000

108,000 108,000

108, 000 - 81,000 27,000 I

Use the following information to answer questions 58 through 60:

Given the following income statement for Jeffrey Company for 2006:

Sales (30,000 units) P600,000

Less Operating Expenses:

Variable P390,000

Fixed 140 000 530.000

Net income �0 OQQ

58. The break-even point for 2006 is

a. 26,600 units. C. P460,000.

b. 17,500 units. d. •P400,000.

59. The Company's degree of operating leverage is

a. 3. C. 4.28.

b. 2. d. 8.57.

60. The Company's margin of safety (rounded to the nearest whole percent) is

a. 33%. C. 12%.

b. 50%. d. 67%.
Supporting Analysit/Compuration:

(58) Answer: D

BEP 140,000

20 - 13

20,000 unus or 400.OOQ

(59) Answer:A

DOL = - 210,000 __

210,000 - 140,000

3A-28

Cost-Volume-Profit Relationships

(60) Answer: A

MS

AS - BES

200,000

600.000

= MS rate

61. At a break-even point of 800 units sold, White Company's variable costs

are P800 and its fixed costs are P400. What will the Company's net

income be at a volume of 801 units?

a. P1.50 C. P0.50

b. P 1.00 d. P2.00

Answer: C

Srpporing Anatysi/Cotrcrrtation:

P400 _ =

CM per unit 800

CM per Unit - 0.50

Net income 1 unit x P0.50

= P0.50
62. The break-even volume in units will decrease if there is a(an)

a. decrease in unit selling price.

b. increase in total fixed costs.

c. increase in unit variable costs.

4 none of these

Answer: D

63. A P2 increase in a product's variable cost per unit accompanied by a P2

increase in its selling price per unit will

a. decrease the degree of operating leverage.

b. result in a decrease in the contribution margin.

C. have no effect on the break-even volume.

d. have no effect on the contribution margin ratio.

Answer: C

3A-29

64. Gerber Company is planning to sell 200,000 units of product 0 for P2 a

unit. The contribution margin is 25%. Gerber will break even at this

level of sales. What would be the fixed costs?

65.

66.

a. P 100,000 c. P200,000

b. P160,000 d. P300,000 (AICPA adapted)

Answer: A

Supporting Analysis/C'omputation:

R' is equal to CM

CM - 25% x 400,000

P1 QQQ

How may the following be used in calculating the breakeven point in

units?

Contribution
Fixed costs margin per unit

a. Denominator Numerator

b. Denominator Not used

c. Numerator Not used

d. Numerator Denominator (AICPA adapted)

Answer: D

The contribution margin decreases when sales volume remains the same

and

A. fixed costs increase.

b. fixed costs decrease.

c. variable cost per unit increases.

67.

d. variable cost per unit decreases. (AICPA adapted)

Answer: C

How would the following be used in calculating sales necessary to realize a

projected profit?

Combination

Projected profit margin ratio

a. Denominator Numerator

b. Denominator Not used

c. Numerator Numerator

d. Numerator Denominator (AICPA adaPted)

Answer: D

3A-30

Cost- Volume-Profit Relationships