1. 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
Total fixed costs
What is the break-even point in dollars?
2. Roosevelt Corporation has a weighted-average unit contribution margin of $40 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. How many Standards would Roosevelt sell at the break-even point?
3. The degree of operating leverage
does not provide a reliable measure of a company's earnings volatility.
cannot be used to compare companies.
is computed by dividing total contribution margin by net income.
measures how much of each sales dollar is available to cover fixed expenses.
4. Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 75,000 units. Warner's margin of safety ratio is
5. In a sales mix situation, at any level of units sold, net income will be higher if
more higher contribution margin units are sold than lower contribution margin units.
more lower contribution margin units are sold than higher contribution margin units.
weighted-average unit contribution margin decreases.
more fixed expenses are incurred.
6. Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. Net income is
7. 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 $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point?
8. 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 3,000 machine hours available to manufacture a product, income will be
$6,000 more if Product A is made.
$6,000 less if Product B is made.
$6,000 less if Product A is made.
the same if either product is made.
9. In 2012, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $455,000. The same variable expenses per unit and fixed expenses are expected for 2013. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2013?
10. 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 $1,110,000. What is Novotna's break-even point in dollars?
11. For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80. What is the margin of safety in dollars?
12. 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 $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will be the total contribution margin at the break-even point?
13. A shift from low-margin sales to high-margin sales
will always decrease net income.
will always decrease units sold.
may increase net income, even though there is a decline in total units sold.
will always increase net income.
14. What is the key factor in determining sales mix if a company has limited resources?
Contribution margin per unit of limited resource
Total contribution margin
The cost of limited resources
The amount of fixed costs per unit