1. The Reiff Company sells snow boards for $270 apiece. Variable expenses are 36% and fixed expenses are $4,400. Approximately how many snowboards must Reiff sell in order to earn a profit of $1,200?

a. 32

b. 25

c. 58

d. 43

2. The Reiff Company sells snow boards for $270 apiece. The contribution margin is $167.40 and the fixed expenses are $5,000. Approximately how many snowboards must Reiff sell in order to breakeven?

a. 26

b. 19

c. 25

d. 30

3. The Werneske Company sells bikes for $300 apiece. Variable expenses are 40%, and fixed expenses are $6,000. What dollar amount of sales must the company have in order to breakeven?

a. $10,000

b. $11,800

c. $12,200

d. $10,400

 

4. The Werneske Company determined that they needed target sales of $22,222 if it was going to earn a profit of $2,000. The CMR is 45%. Given this, what is the approximate amount of the company’s fixed expenses?

a. $6,000

b. $4,000

c. $8,000

d. $10,000

5. The Lovejoy Company has sales during the month of $88,400. Variable expenses are $48,620 and fixed expenses are $16,000. Assuming a tax rate of 40%, what dollar amount of sales would be necessary to make an after tax profit of $8,000?

a. $80,000

b. $65,185

c. $69,287

d. $47,845

 

6. The Picton Company has sales of $10,000 and a CMR of 63%. If sales increased to $14,000, by how much would profit increase?

a. $4,000

b. $3,180

c. $2,520

d. Cannot determine from information given

 

7. The Lovejoy Company is a business that is organized as a sole proprietorship. The owner Lorie Lovejoy works in the business daily but does not receive a salary. If Lorie worked for a different company she would probably receive a salary of about $38,000 a year. The company earned a profit of $96,000 for the year and the owner withdrew $50,000. Average equity for the year is about $300,000. The ROE that Lovejoy should use to compare its results with other corporate forms of business in the same industry would be:

a. 32.00%

b. 19.33%

c. 2.67%

d. 12.67%

8. The Picton Company had stockholders’ equity of $598,000 at the beginning of the year. During the year the company had net income of $76,000 although only $56,000 of the net income resulted in an increase to cash. Two of the stockholders also work in the company and earn a combined salary of $126,000. The ROE for the company for the year is:

a. 11.95%

b. 31.76%

c. 11.28%

d. 8.81%

9. The Reed Company has determined that they need to have a target profit of $120,000 after tax. How much profit must they have before tax to meet this goal? Variable Expenses are 78% of sales, fixed expenses are $225,000 and the tax rate is 35%. The before tax target profit needs to be:

a. $184,615

b. $42,000

c. $342,847

d. Cannot determine from information given

10. The Calvert Company has four departments, A, B, C, and D. The sales, variable expenses and contribution margins for the departments are presented below.

The company's marketing department has suggested that the company increase advertising expense (a fixed expense) by $3,000. The company expects that this increase in marketing will cause a $10,000 increase in sales, regardless of the department advertised. Given this information, which department should the company focus its marketing effort on, given that the company wants to make the highest profit?

a. Department C

b. Department D

c. Department B

d. Department A