Question

13. Doubtfire Corporation sells a single product for $15 per unit. Last year, the company's sales revenue was $225.000 and its net operating income was $18,000. If fixed expenses totaled $72,00 for the year, the break-even point in unit sales was: A 15,000 B 9.900 C 14,100 D. 12,000 14. The Jaws Corporation's variable menses are 35% of sales. Jaws Corporation is contemplating an advertising campaign that will cost $25.000. If sales increase by $75,000, the company's net operating income will increase by A $26.250 B. $23.750 C. $ 1.250 D. $65,000 15. The 5 o'clock Corporation is planning to sell 100 000 units for $2.00 per unit and will break even at this level of sales. Fixed expenses will be $75,000. What are the company's variable expenses per unit? A $0.75 B. $1.00 C. $1.25 D. $1.10 16. Hogan Mining Corporation's single product data appears below: Selling price per unit Variable expense per unit Fixed expense per month $150.00 $49.50 $138,690 The break-even in monthly dollar sales is closet to: A. $207,000 B. $255,321 C. $238,690 D. $220,273 17. Koda Corporation reported the following data for its most recent year: sales, $500,000, variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage A 10 B. 2 C. 4 D. 2.5

Answer 1

13 Option D 12,000 units is right answer Break Even Point sales in Units = Fixed Assets/(Sales Price per unit - Variable Cost per unit) Break Even Point sales in Units = $75,000 / ($15 - $6) = 12,000 units Workings: Variable Expenses = Sales - Fixed Cost - Operating Income Variable Expenses = $225,000 - $72,000 - $18,000 = $135,000 Variable Expenses per unit = $135,000 / 15,000 units Number of units sold = Sales / Sale price per unit Number of units sold = $225,000 / $15 = 15,000 units 14 Option B $23,750 is right Increase in sale $75,000 Contribution = Sale * (1 - Variable cost in percent) Contribution = $75,000 * (1 -0.35) Contribution = $48,750 Increase in Net Operating Income = $48,750 - $25,000 = $23,750 15 Option C $1.25 is right answer If sale unit is break even point the Net operating income will be $0 Variable cost per unit = (Sale - Fixed Cost) / Number of units sold Variable Cost per unit = ($2,00,000-$75,000) / 1,00,000 Variable cost per unit = $1.25 16 Option A $207,000 is Right Answer Break even sale in $ = Fixed Cost / Contribution margin percent Break even sales = $138,690 / (($150-$49.5)/150) Break even sales in $ =$207,000 17 Option A 10 is right answer Degree of operating leverage (DOL) = Change in Net Operating Profit / Change in Sales DOL =(($500,000 - $300,000-$15,0000) / $500,000 )*100=10%