11

Student: ___________________________________________________________________________

1. A shift in the sales mix from products with a low contribution margin ratio toward products with a high
contribution margin ratio will lower the break-even point in the company as a whole.
True False
2. The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin
ratio.
True False
3. In two companies making the same product and with the same total sales and total expenses, the
contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses
in its cost structure.
True False
4. For a given level of sales, a low contribution margin ratio will produce less net income than a high
contribution margin ratio.
True False
5. Once the break-even point has been reached, increases in contribution margin will be reflected dollar for
dollar in increased net income.
True False
6. The formula for the break-even point is the same as the formula to attain a given target profit for the
special case where the target profit is zero.
True False
7. At the break-even point: Sales - Variable expenses = Fixed expenses.
True False
8. If fixed expenses increase by $10,000 per year, then the level of sales needed to break even will also
increase by $10,000.
True False
9. The total volume in sales dollars that would be required to attain a given target profit is determined by
dividing the sum of the fixed expenses and the target profit by the contribution margin ratio.
True False
10. A company with sales of $70,000 and variable expenses of $40,000 should spend $10,000 on increased
advertising if the increased advertising will increase sales by $20,000.
True False
11. If the fixed expenses increase in a company, and all other factors remain unchanged, then one would
expect the margin of safety to decrease.
True False
12. The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in
dollars.
True False
13. If two companies produce the same product and have the same total sales and same total expenses,
operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost
structure.
True False
14. If two companies have the same total sales and total expenses and make the same product, the volatility
of net income with changes in sales will tend to be greater in the company with a higher proportion of
fixed expenses in its cost structure.
True False
15. A company with a degree of operating leverage of 4 would expect net income to increase by 200% if
sales increased from $100,000 to $150,000.
True False
16. The difference between total sales in dollars and total variable expenses is called:
A. net operating income.
B. net profit.
C. the gross margin.
D. the contribution margin.
17. Brasher Company manufactures and sells a single product that has a positive contribution margin. If the
selling price and variable expenses both decrease by 5% and fixed expenses do not change, then what
would be the effect on the contribution margin per unit and the contribution margin ratio?

A. Choice A.
B. Choice B.
C. Choice C.
D. Choice D.
18. Once the break-even point is reached, which of the following statements is true?
A. the total contribution margin changes from negative to positive.
B. net income will increase by the unit contribution margin for each additional item sold.
C. variable expenses will remain constant in total.
D. the contribution margin ratio begins to decrease.
19. The contribution margin ratio always increases when the?
A. variable expenses as a percentage of sales increase.
B. variable expenses as a percentage of sales decrease.
C. break-even point increases.
D. break-even point decreases.
20. If the fixed expenses of a product increase while variable expenses and the selling price remain constant,
what will happen to the total contribution margin and the break-even point?

A. Choice A.
B. Choice B.
C. Choice C.
D. Choice D.
21. The total contribution margin decreases if sales volume remains the same and which of the following
occurs?
A. fixed expenses increase.
B. fixed expenses decrease.
C. variable expense per unit increases.
D. variable expense per unit decreases.
22. The break-even in units sold will decrease if there is an increase in which of the following?
A. unit sales volume.
B. total fixed expenses.
C. unit variable expenses.
D. selling price.
23. Break-even analysis assumes which of the following to be true?
A. total costs are unchanged.
B. unit variable expenses are unchanged.
C. variable expenses are nonlinear.
D. unit fixed expenses are unchanged.
24. A company increased the selling price for its product from $1.00 to $1.10 a unit when total fixed
expenses increased from $400,000 to $480,000 and variable expense per unit remained unchanged. How
would these changes affect the break-even point?
A. the break-even point in units would increase.
B. the break-even point in units would decrease.
C. the break-even point in units would remain unchanged.
D. the effect cannot be determined from the information given.
25. The ratio of fixed expenses to the unit contribution margin is the?:
A. break-even point in unit sales.
B. profit margin.
C. contribution margin ratio.
D. margin of safety.
26. The break-even point in unit sales increases when variable expenses?
A. increase and the selling price remains unchanged.
B. decrease and the selling price remains unchanged.
C. decrease and the selling price increases.
D. remain unchanged and the selling price increases.
27. The margin of safety percentage is computed as?
A. Break-even sales/Total sales.
B. Total sales - Break-even sales.
C. (Total sales - Break-even sales)/Break-even sales.
D. (Total sales - Break-even sales)/Total sales.
28. The margin of safety is equal to?
A. Sales - Net income.
B. Sales - (Variable expenses/Contribution margin).
C. Sales - (Fixed expenses/Contribution margin ratio).
D. Sales - (Variable expenses + Fixed expenses).
29. The amount by which a company's sales can decline before losses are incurred is called the?
A. contribution margin ratio.
B. degree of operating leverage.
C. margin of safety.
D. contribution margin ratio leverage.
30. The degree of operating leverage can be calculated as?
A. contribution margin divided by sales.
B. gross margin divided by net income.
C. net income divided by sales.
D. contribution margin divided by net income.
31. If company A has a higher degree of operating leverage than company B, then?
A. company A has higher variable expenses.
B. company A's profits are more sensitive to percentage changes in sales.
C. company A is more profitable.
D. company A is less risky.
32. Marston enterprises sells three chemicals: petrol, septine, and tridol. Petrol's unit contribution margin is
higher than septine's which is higher than tridol's. Which one of the following events is most likely to
increase the company's overall break-even point?
A. the installation of new computer-controlled equipment and subsequent lay-off of assembly-line
workers.
B. a decrease in tridol's selling price.
C. an increase in the overall market demand for septine.
D. a change in the relative market demand for the products, with the increase favouring petrol relative to
septine and tridol.
33. A company has provided the following data:

If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and
all other factors remain the same, net income will?
A. increase by $61,000.
B. increase by $20,000.
C. increase by $3,500.
D. increase by $11,000.
34. A company has provided the following data:

If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors
remain the same, net income will?
A. decrease by $31,875.
B. decrease by $15,000.
C. increase by $20,625.
D. decrease by $3,125.
35. Last year, Twins Company reported $750,000 in sales (25,000 units) and a net income of $25,000. At the
break-even point, the company's total contribution margin equals $500,000. Based on this information,
which of the following is true?
A. contribution margin ratio is 40%.
B. break-even point is 24,000 units.
C. variable expense per unit is $9.
D. variable expenses are 60% of sales.
36. Last year, Black Company reported sales of $640,000, a contribution margin of $160,000, and a net loss
of $40,000. Based on this information, the break-even point was?
A. $480,000.
B. $640,000.
C. $800,000.
D. $960,000.
37. The break-even point in sales for Rice Company is $360,000 and the company's contribution margin ratio
is 30%. If Rice Company desires an income of $84,000, sales would have to total?
A. $280,000.
B. $480,000.
C. $560,000.
D. $640,000.
38. The margin of safety in the Flaherty Company is $24,000. If the company's sales are $120,000 and its
variable expenses are $80,000, its fixed expenses must be?
A. $8,000.
B. $16,000.
C. $24,000.
D. $32,000.
39. Young Company has a margin of safety percentage of 20%. The break-even point is $400,000 and the
variable costs are 40% of sales. Given this information, the net income is?
A. $0.
B. $48,000.
C. $60,000.
D. $80,000.
40. Dodero Company produces a single product that sells for $100 per unit. Fixed expenses total $12,000 per
month, and variable expenses are $60 per unit. The company's sales average 500 units per month. Which
of the following statements is correct?
A. the company's break-even point is $12,000 per month.
B. the fixed expenses remain constant at $24 per unit for any activity level within the relevant range.
C. the company's contribution margin ratio is 40%.
D. responses a, b, and c are all correct.
41. North Company sells a single product. The product has a selling price of $30 per unit and variable
expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a
break-even of?
A. $42,000.
B. $60,000.
C. $85,714.
D. $200,000.
42. Gerber Company is planning to sell 200,000 units for $2.00 a unit and will just break even at this level of
sales. The contribution margin ratio is 25%. What are the company's fixed expenses?
A. $100,000.
B. $160,000.
C. $200,000.
D. $300,000.
43. Marling Corporation has budgeted the following data:

What is the break-even in sales dollars?

A. $400,000.
B. $420,000.
C. $540,000.
D. $660,000.
44. Wallace, Inc., prepared the following budgeted data based on a sales forecast of $6,000,000:

What would be the amount of sales dollars at the break-even point?

A. $2,250,000.
B. $3,500,000.
C. $4,000,000.
D. $5,300,000.
45. Koby Co. has sales of $200,000 with variable expenses of $150,000, fixed expenses of $60,000, and a net
loss of $10,000. How much would Koby have to sell in order to achieve a net income of 10% of sales?

A. $375,000.
B. $400,000.
C. $431,000.
D. $451,000.
46. Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company's degree
of operating leverage is 8. At this sales level, fixed expenses equal?
A. $50,000.
B. $75,000.
C. $87,500.
D. $100,000.
47. Scott Company's variable expenses are 72% of sales. The company's break-even point in sales is
$2,450,000. If sales are $60,000 below the break-even point, the company would report a?
A. $16,800 loss.
B. $43,200 loss.
C. $60,000 loss.
D. cannot be determined from the data given.
48. Last year, Perry Company reported profits of $4,200. Its variable expenses totalled $66,000 or $6 per
unit. The unit contribution margin was $3.00. The break-even point in units for Perry Company is?
A. 9,600.
B. 11,000.
C. 12,400.
D. 22,000.
49. At a break-even point of 800 units sold, White Company's variable expenses are $8,000 and its fixed
expenses are $4,000. What will the Company's net income be at a volume of 801 units?
A. $5.
B. $10.
C. $15.
D. $20.
50. The following information pertains to Rica Company:

How much is Rica's break-even point in number of units?

A. 9,848.
B. 10,000.
C. 18,571.
D. 26,000.
51. Curtis Company anticipates selling 10,000 units next year. The company wants to earn a net income
equal to 10% of sales. If variable expenses are $12 per unit and fixed expenses total $78,000 per year,
what selling price must be established to achieve the desired level of net income?
A. $18.00 per unit.
B. $19.80 per unit.
C. $21.78 per unit.
D. $22.00 per unit.
52. Carver Company produces a product that sells for $30. Variable manufacturing costs are $15 per unit.
Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and
administrative costs are $4 per unit. A selling commission of 10% of the selling price is paid on each unit
sold. The contribution margin per unit is?
A. $3.
B. $8.
C. $12.
D. $15.
53. At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000.
What will the 401st unit sold contribute to profit?
A. $0.
B. $5.
C. $10.
D. $15.
54. The following information relates to Clyde Corporation, which produced and sold 50,000 units last
month.

There were no beginning or ending inventories. Production and sales next month are expected to be
40,000 units. The company's unit contribution margin next month should be?
A. $3.10.
B. $7.98.
C. $13.30.
D. $16.63.
55. The following is last month's contribution format income statement:

What is the company's margin of safety percentage to the nearest whole percent?
A. 17%.
B. 20%.
C. 40%.
D. 42%.
56. The following is last month's contribution format income statement:

What is the company's margin of safety in dollars?

A. $100,000.
B. $250,000.
C. $600,000.
D. $1,500,000.
57. The following data pertain to Wistron Company's two products:

If fixed expenses for the company as a whole are $60,000 and the product mix is constant, the overall
break-even point for the company would be?
A. $100,000.
B. $132,000.
C. $150,000.
D. $153,846.
58. The following monthly data are available for the Phelps Company:

The break-even sales for the month for the company are?
A. $91,667.
B. $137,500.
C. $148,000.
D. $203,000.
59. The following data pertain to last month's operations:

The break-even point in dollars is?

A. $6,000.
B. $7,500.
C. $11,250.
D. $18,000.
60. The following data pertain to last month's operations:

The break-even point in dollars is?

A. $160,000.
B. $200,000.
C. $240,000.
D. $300,000.
61. The following is last month's contribution format income statement:

What is the company's break-even sales in units?

A. 0 units.
B. 6,000 units.
C. 8,000 units.
D. 12,000 units.
62. The following is last month's contribution format income statement:

What is the company's break-even in sales dollars?

A. $0.
B. $1,200,000.
C. $1,600,000.
D. $1,800,000.
63. Roberts Company sells a single product at a selling price of $55 per unit. Variable costs are $30.25 per
unit and fixed costs are $113,850.
Roberts Company's break-even point is?
A. $207,000.
B. 2,070 units.
C. $253,000.
D. 3,764 units.
64. A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total
$120,000 annually. How many units must be sold to yield a profit of $30,000?
A. 12,500.
B. 18,750.
C. 20,000.
D. 25,000.
65. A total of 30,000 units were sold last year. The contribution margin per unit was $2, and fixed expenses
totalled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the
contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn
the same net income as was earned last year?
A. 13,000.
B. 23,000.
C. 30,000.
D. 33,000.
66. A product sells for $20 per unit and has a contribution margin ratio of 40%. Fixed expenses total
$240,000 annually. How many units of the product must be sold to yield a profit of $60,000?
A. 30,000.
B. 37,500.
C. 40,000.
D. 65,000.
67. Lindsay Company reported the following results from sales of 5,000 units for the month of June:

Assume that Lindsay increases the selling price of the product by 10% on July 1. How many units would
have to be sold in July in order to generate a profit of $20,000?
A. 4,000.
B. 4,300.
C. 4,500.
D. 5,000.
68. Austin Manufacturing had the following operating data for the year just ended.

Management plans to improve the quality of its only product by: (1) replacing a component that costs
$3.50 with a higher-grade component that costs $5.50; and (2) renting a packing machine for $18,000 a
year. If the desired target profit is $288,000, how many units must the company sell?
A. 19,300.
B. 20,842.
C. 21,316.
D. 22,500.
69. Kern Company prepared the following tentative budget for next year:

The sales manager argues that the unit selling price could be increased by 20%, with an expected volume
decrease of only 10%. If Kern incorporates these changes in its budget, what should be the budgeted net
income?
A. $66,000.
B. $90,000.
C. $120,000.
D. $145,000.
70. Wilson Company prepared the following preliminary budget assuming no advertising expenditures:

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 income?
A. $175,000.
B. $190,000.
C. $205,000.
D. $365,000.
71. Loren Company's single product has a selling price of $15 per unit. Last year the company reported total
variable expenses of $180,000, fixed expenses of $90,000, and a net income of $30,000. A study by the
sales manager discloses that a 15% increase in the selling price would reduce unit sales by 10%. If her
proposal is adopted, net income would increase by?
A. $7,500.
B. $28,500.
C. $37,500.
D. $45,000.
72. The following monthly data are available for the Eager Company and its only product:

The margin of safety for the company for March was?

A. $135,000.
B. $225,000.
C. $315,000.
D. $495,000.
73. Ostler Company's net income last year was $10,000 and its contribution margin was $50,000. Using the
operating leverage concept, if the company's sales increase next year by 8%, net income can be expected
to increase by?
A. 16%.
B. 20%.
C. 40%.
D. 160%.
74. If sales increase from $80,000 per year to $120,000 per year, and if the operating leverage is 5, then net
income should increase by?
A. 100%.
B. 167%.
C. 250%.
D. 334%.
75. The following is last month's contribution format income statement:

What is the company's degree of operating leverage?

A. 0.125.
B. 0.333.
C. 3.0.
D. 8.0
76. Goodman Company has sales of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If
total fixed costs are $66,000, the degree of operating leverage is?
A. 0.79.
B. 0.93.
C. 1.73.
D. 2.67.
77. Using Variable Costing, which of the following is not included in product costs?
A. direct materials.
B. direct labour.
C. variable manufacturing overhead.
D. fixed manufacturing overhead.
78. In the income statement of a manufacturing business with both variable and fixed overhead costs of
production, if there are no beginning or ending inventories, comparing Absorption Costing to Variable
Costing, which of the following statements is true?
A. under Absorption Costing, cost of goods sold will be higher and net income will be higher than under
Variable Costing.
B. under Variable Costing, cost of goods sold will be lower and net income will be higher than under
Absorption Costing.
C. under Absorption Costing, cost of goods sold will be higher than under Variable Costing.
D. there will be no differences in cost of goods sold and net income between the two methods.
The following is Addison Corporation's contribution format income statement for last month:

The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last
month.
79. What is the company's contribution margin ratio?
A. 30%.
B. 70%.
C. 150%.
D. 250%.
80. What is the company's break-even in units?
A. 0.
B. 12,000.
C. 18,000.
D. 20,000.
81. If sales increase by 100 units, by how much should net income increase?
A. $400.
B. $1,500.
C. $2,500.
D. $4,800.
82. How many units would the company have to sell to attain target profits of $150,000?
A. 22,000.
B. 25,000.
C. 26,667.
D. 37,500.
83. What is the company's margin of safety in dollars?
A. $120,000.
B. $400,000.
C. $600,000.
D. $880,000.
84. What is the company's degree of operating leverage?
A. 0.12.
B. 0.4.
C. 2.5.
D. 3.3.
The following is Allison Corporation's contribution format income statement for last month:

The company has no beginning or ending inventories. The company produced and sold 10,000 units last
month.
85. What is the company's contribution margin ratio?
A. 20%.
B. 62.5%.
C. 160%.
D. 500%.
86. What is the company's break-even sales in dollars?
A. $0.
B. $400,000.
C. $640,000.
D. $700,000.
87. If sales increase by 200 units, by how much should net income increase?
A. $2,000.
B. $5,000.
C. $6,000.
D. $10,000.
88. How many units would the company have to sell to attain target profits of $120,000?
A. 10,400.
B. 10,800.
C. 11,200.
D. 12,000.
89. What is the company's margin of safety percentage?
A. 10%.
B. 20%.
C. 25%.
D. 40%.
90. What is the company's degree of operating leverage?
A. 0.2.
B. 1.7.
C. 5.0.
D. 8.0.
McGordon Corporation has provided the following data:

91. The contribution margin is?

A. $72,000.
B. $240,000.
C. $560,000.
D. $632,000.
92. The break-even point in sales dollars is?
A. $240,000.
B. $408,000.
C. $560,000.
D. $728,000.
The following data relate to a company that produces and sells a travel guide that is updated monthly:

Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July.
93. The unit contribution margin per book is?
A. $8.30.
B. $10.30.
C. $10.80.
D. $14.30.
94. The contribution margin ratio for the book is?
A. 51.5%.
B. 51.9%.
C. 54.0%.
D. 71.5%.
95. The break-even point in units is?
A. 6,504 books.
B. 7,407 books.
C. 7,767 books.
D. 8,247 books.
96. The degree of operating leverage for July is?
A. the same as that for June.
B. higher than that for June.
C. lower than that for June.
D. not determinable.
97. The degree of operating leverage for July is closest to:
A. 3.48.
B. 4.22.
C. 4.48.
D. 8.70.
Dorian Company produces and sells a single product. The product sells for $60 per unit and has a
contribution margin ratio of 40%. The company's monthly fixed expenses are $28,800.
98. The variable expense per unit is?
A. $24.00.
B. $28.80.
C. $31.20.
D. $36.00.
99. The break-even point in sales dollars is?
A. $0.
B. $28,800.
C. $48,000.
D. $72,000.
100.If Dorian Company desires a monthly net income equal to 10% of sales, monthly sales will have to be?

A. $45,600.
B. $90,000.
C. $96,000.
D. $120,000.
101.If the selling price is reduced by 5%, variable expenses reduced by $1.00, and fixed expenses increased to
a total of $38,400, how many units would need to be sold to earn a net income of $21,000?
A. 1,000.
B. 1,700.
C. 2,700.
D. 2,950.
Arthur Company had the following data for the year just ended:

102.If the company wants to increase its total contribution margin by 40% in the next year, all other factors
remaining the same, it will need to increase its sales by?
A. $50,400.
B. $67,200.
C. $72,000.
D. $96,000.
103.If the company wants its margin of safety to equal $35,000 next year, all other factors remaining the
same, how many units will it need to sell?
A. 833.
B. 1,000.
C. 1,583.
D. 1,833.
104.If the company's sales volume increases by 30% next year, all other factors remaining the same, its net
income will increase by?
A. $37,800.
B. $50,400.
C. $72,000.
D. $92,400.
105.If the company's fixed costs decrease by 20% next year, all other factors remaining the same, the break-
even level will change from that of the current year by (rounded to the nearest whole unit)?
A. 200 unit increase.
B. 200 unit decrease.
C. 440 unit decrease.
D. no change in the break-even point.
Paxton Corp has provided the following data concerning its operations last month:

Paxton Corp is a retailing organization.

106.The operating leverage is?
A. 0.33.
B. 3.
C. 5.
D. 8.
107.The contribution margin ratio is?
A. 12.5%.
B. 25.0%.
C. 33.0%.
D. 37.5%.
108.The break-even sales in dollars is (round to the nearest dollar)?
A. $148,148.
B. $266,667.
C. $333,333.
D. $350,000.
Janet Company produces a game that sells for $17 per game. Variable expenses are $9 per game and
fixed expenses total $172,000 annually.
109.The break-even point is closest to?
A. 10,118 units.
B. 19,111 units.
C. 21,500 units.
D. 24,000 units.
110.The contribution margin ratio is closest to?
A. 1.9%.
B. 2.1%.
C. 47.1%.
D. 52.9%.
 Fletcher Company has three products with the following characteristics:

111.The overall contribution margin ratio for the company as a whole is (to the nearest tenth of a percent)?

A. 25.0%.
B. 25.3%.
C. 28.5%.
D. 75.0%.
112.If total units sold remain unchanged, but the sales mix shifts more heavily toward Product C, one would
expect the overall contribution margin ratio to?
A. increase.
B. decrease.
C. remain unchanged.
D. none of these.
Oslo Co.'s industrial photo-finishing division incurred the following expenses last year:

During the year, the division sold 300,000 photo-prints for $2.00 each.
113.How many photo-prints did the division have to sell to break even?
A. 60,000.
B. 90,000.
C. 120,000.
D. 180,000.
114.What was the division's total contribution margin?
A. $60,000.
B. $150,000.
C. $180,000.
D. $250,000.
115.If the division produces and sells 350,000 photo-prints, its total expenses would be?
A. $525,000.
B. $540,000.
C. $615,000.
D. $630,000.
Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as
follows:

116.The break-even point in units per year is?

A. 15,200 units.
B. 26,600 units.
C. 38,000 units.
D. 40,000 units.
117.How many units need to be sold to earn an annual net income equal to 10% of sales?
A. 44,000 units.
B. 53,200 units.
C. 54,500 units.
D. 47,500 units.
118.In the current year, the company sold 43,000 units. Due to competition, management will be forced
to lower the selling price by 10% next year. How many units must be sold next year to earn the same
income as was earned in the current year?
A. 50,000 units.
B. 53,200 units.
C. 58,800 units.
D. 60,200 units.
Junsin Corporation's budget for next year appears below. The budget assumes the company will sell
30,000 units.

119.The break-even point in annual sales dollars is?

A. $350,000.
B. $400,000.
C. $460,000.
D. $530,000.
120.The company's margin of safety as a percentage of sales (rounded to the nearest whole percent) is?
A. 12%.
B. 33%.
C. 50%.
D. 67%.
Hooper Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The
company records show the following monthly data relating to these two products:

121.The break-even in sales dollars for the expected sales mix is closest to?
A. $95,178.
B. $109,091.
C. $160,772.
D. $175,644.
122.If the expected monthly sales in units were divided equally between the two models (900 Standard and
900 Deluxe), the break-even level of sales would be?
A. the same as with the expected sales mix.
B. higher than with the expected sales mix.
C. lower than with the expected sales mix.
D. cannot be determined with the available data.
 Wright Corporation's contribution format income statement for last month appears below.

There were no beginning or ending inventories. The company produced and sold 3,000 units during the
month.
123.If sales decrease by 500 units by next month, by how much would fixed expenses have to be reduced to
maintain the current net income?
A. $2,000.
B. $3,000.
C. $6,000.
D. $7,500.
124.The company has an opportunity to secure a special order of 800 units if it is willing to drop the selling
price on these units to $13. Costs of securing the special order would be $1,000. The special order would
not affect the company's regular sales. If the special order is accepted, the company's overall net income
will?
A. increase $2,200.
B. increase $3,200.
C. increase $3,800.
D. remain the same.
125.The following is Arkadia Corporation's contribution format income statement for last month:

The company has no beginning or ending inventories and produced and sold 20,000 units during the
month.
Required:
a. What is the company's contribution margin ratio?
b. What is the company's break-even in units?
c. If sales increase by 100 units, by how much should net income increase?
d. How many units would the company have to sell to attain target profits of $125,000?
e. What is the company's margin of safety in dollars?
f. What is the company's degree of operating leverage?