OLCAE09 - POST-TEST 3

1.Seijuro Akashi Inc., a company that produces and sells a single product, has provided its contribution
format income statement for January. 

Sales (4,200 units)            $155,400 

Variable expenses               100,800
Contribution margin              54,600 
Fixed expenses                      42,400 
Net operating income           12,200 

If the company sells 4,600 units, its total contribution margin should be closest to:
$54,600
$59,800
$69,400
$13,362
2.Daiki Aomine Inc. produces and sells a single product. The company has provided its contribution
format income statement for June. 

Sales (8,800 units)         $528,000 

Variable expenses            290,400
Contribution margin         237,600 
Fixed expenses                 211,700 
Net operating income        25,900 

If the company sells 9,200 units, its net operating income should be closest to:
$27,077
$49,900
$36,700
$25,900
3.Teppei Kiyoshi Corporation's fixed monthly expenses are $29,000 and its contribution margin ratio is
56%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the
company's net operating income in a month when sales are $95,000?
$12,800
$24,200
$53,200
$66,000
4.Taiga Kagami Corporation, a company that produces and sells a single product, has provided its
contribution format income statement for November. 

Sales (5,700 units)            $319,200 

Variable expenses               188,100 
Contribution margin            131,100 
Fixed expenses                    106,500 
Net operating income           24,600 
Solution:

If the company sells 5,300 units, its net operating income should be closest to:
$24,600
$2,200
$22,874
$15,400

Solution:
Sales (5,300 units x 56 ) 296,000
Variable expense 174,900
Contribution Margin 121,900
Fixed Expense 106,500
Net Operating Income 15,400

5.Atsushi Murasakibara Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are
$36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the
company's net operating income in a month when sales are $103,000?
$23,740
$59,740
$67,000
$7,260
Solution: Sales........................................................... $103,000 Variable expenses ($103,000 × 42%)........
43,260 Contribution margin ($103,000 × 58%).... 59,740 Fixed expenses...........................................
36,000 Net operating income................................. $ 23,740
Shintaro Midorima 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.
$565,440
$654,000
$88,560
$4,560
Solution: Sales.......................................................... $738,000 Variable expenses ($738,000 × 88%).......
649,440 Contribution margin ($738,000 × 12%)... 88,560 Fixed expenses..........................................
84,000 Net operating income............................... $ 4,560

Tetsuya Kuroko 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:
$301,000
$311,600
$319,200
$66,674
Solution: Current contribution margin ÷ Current sales in units = Contribution margin per unit $319,200 ÷
8,400 = $38 contribution margin per unit If 8,200 units are sold, the total contribution margin will be 8,200
× $38, or $311,600

Data concerning Junpei Hyuga Corporation's single product appear below: 

                                             Per Unit    Percent of Sales 

Selling price                       $140         100%
Variable expenses                28            20%
Contribution margin           112            80% 

The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The
marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a
180 unit increase in monthly sales. 

What should be the overall effect on the company's monthly net operating income of this change?
decrease of $160
increase of $20,160
decrease of $20,000
increase of $160

Solution: 8,000 units 8,180 units Sales (8,000 units, 8,180 units × $140).......... $1,120,000 $1,145,200
Variable expenses ($1,120,000, $1,145,200 × 20%)................ 224,000 229,040 Contribution
margin....................................... 896,000 916,160 Fixed expenses................................................ 719,000
739,000 Net operating income..................................... $ 177,000 $ 177,160 Increase in net operating
income: $177,160 - $177,000 = $160
The Ryota Kise Company reported the following information: 

Sales (400 cases)       $100,000

Variable expenses           60,000 
Contribution margin        40,000 
Fixed expenses                35,000 
Net operating income       5,000 

How much will the sale of one additional case add to Kise's net operating income?
$250.00
$100.00
$150.00
$12.50

Solution: Current contribution margin ÷ Current sales in cases = Contribution margin per case $40,000 ÷
400 = $100 contribution margin per case If one additional case is sold, net operating income will increase
by $100.
Tatsuyo Himuro Company prepared the following preliminary budget assuming no advertising
expenditures: 

Selling price                $10 per unit 

Unit sales                     100,000 
Variable expenses      $600,000 
Fixed expenses           $300,000 

Based on a market study, the company estimated that it could increase the unit selling price by 15% and
increase the unit sales volume by 10% if $100,000 were spent on
advertising. Assuming that these changes are incorporated in its budget, what should

be the budgeted net operating income?

$175,000
$190,000
$205,000
$365,000

Solution:
Sales (110,000 units × $11.50)..................... $1,265,000
Variable expenses (110,000 units × $6*)...... 660,000
Contribution margin...................................... 605,000
Fixed expenses ($300,000 + $100,000)........ 400,000
Net operating income.................................... $ 205,000

Current variable expenses ÷ Current sales in units = Variable expense per unit
$600,000 ÷ 100,000 = $6 variable expense per unit