1. c.

The CMR for the company is 36.84% (rounded). The breakeven sales amount would therefore be equal to the fixed expenses of $16,400 divided by the CMR of 36.84% or $44,517.

2. b.

The breakeven sales for the company should be allocated to the departments based on that department's percentage of sales. The beverage department has 40 % of the sales ($21,576 ¸ $53,940) and therefore should be allocated 40 % of the breakeven sales of $45,556 or $18,222.

3. d.

At a 10% increase (110%), sales will be $42,900, variable expenses will be $32,175 and fixed expenses will remain fixed at $4,400. Therefore, net income would be $6,325.

4. a.

At a 15% decrease (85%), sales will be $33,150, variable expenses will be $24,863 and fixed expenses will remain fixed at $4,400. Therefore, net income would be $3,888.

5. a.

Net income will increase by the contribution margin times the additional casebooks sold less the additional fixed expense incurred. Net income would increase by $16 ´ 800 books or $12,800 less the $5,000 additional fixed expense.

6. c.

A company with high fixed expenses and low variable expenses is said to be highly leveraged. Since Company C has the highest fixed expenses and lowest variable expenses it is the most highly leveraged.

7. c.

A company with low fixed expenses and high variable expenses is said to have low operating leverage. The profits of these companies are not as susceptible to changes in sales volume because of the low fixed costs and high variable costs.

8. b.

The sales mix is the combination of products that make up a company's total sales.

9. d.

If sales for snowboards increase to $100,000, variable expenses, by definition, will still be 66.66% of sales or $66,667. The CM for snowboards will then be $33,333. The total contribution margin for the company will be the $33,333 for snowboards and the $10,000 for skateboards for a total of $43,333. Total sales are $125,000 so the CMR for the company as a whole is 34.67%. The revised breakeven would be calculated by dividing fixed expenses of $18,000 by the CMR of 34.67% (rounded) so the new breakeven is about $51,918. Comparing this to the old breakeven of $51,429, the best answer to this question is an increase of about $500.

10. b.

Since the fixed expenses are still within the relevant range and therefore do not change, additional sales will change profit by the amount of the contribution margin per unit.