Case Reading 3-4 Quiz

Case Reading 3-4 Quiz

The McFarland Company sells food and beverages. A contribution income statement for the company's two products appears below:

	Beverages	Food	Total
Sales	$ 18,000	$ 39,000	$ 57,000
Variable Expenses	12,600	23,400	36,000
Contribution Margin	$ 5,400	$ 15,600	21,000
Fixed Expenses			16,400
Net Income			$ 4,600

The breakeven sales for the company as a whole would be:

a. $32,846

b. $46,837

c. $44,517

d. $52,916

The McFarland Company sells food and beverages. A contribution income statement for the company's two products appears below:

	Beverages	Food	Total
Sales	$ 21,576	$ 32,364	$ 53,940
Variable Expenses	15,103	19,418	34,522
Contribution Margin	$ 6,473	$ 12,946	19,418
Fixed Expenses			16,400
Net Income			$ 3018

The company has determined that its breakeven sales are $45,556. Given the same sales mix, how much of the breakeven sales must be earned by the beverage department?

a. $22,778

b. $18,222

c. $13,667

d. $17,962

The Doyle Company's contribution income statement appears below:

Sales	$39,000
Variable Expenses	29,250
Contribution Margin	9,750
Fixed Expenses	4,400
Net Income	$5,350

The Doyle Company expects sales to increase by 10% next period. Given such an increase, what would net income be?

a. $6,537

b. $5,842

c. $6,958

d. $6,325

The Doyle Company's contribution income statement appears below:

Sales	$39,000
Variable Expenses	29,250
Contribution Margin	9,750
Fixed Expenses	4,400
Net Income	$5,350

The Doyle Company expects sales to decrease by 15% next period. Given such a decrease, what would net income be?

a. $3,888

b. $4,548

c. $3,670

d. $4,103

The Harvard Company is a profitable company that sells casebooks. Each casebook sells for $64 and has a contribution margin of $16. The Company has reached its maximum capacity at the current facility and is considering moving to a bigger building. A bigger building would allow the company to sell 800 additional casebooks but the company's rent expense would increase from $20,000 to $25,000. Assuming all other fixed expenses are unchanged, how much additional profit (or loss) would the company earn if they move to the new facility?

a. $7,800 profit

b. $12,200 loss

c. $46,200 profit

d. $26,200 profit

The contribution income statements for four different companies are presented below.

	Company A	Company B	Company C	Company D
Sales	$100,000	$100,000	$100,000	$100,000
Variable Expenses	66,000	79,000	44,000	55,000
Contribution Margin	34,000	21,000	56,000	45,000
Fixed Expenses	14,000	1,000	36,000	25,000
Net Income	$20,000	$20,000	$20,000	$20,000

Which company has the highest operating leverage?

a. Company A

b. Company B

c. Company C

d. Company D

Which one of the following statements is true?

a. A company with a low operating leverage will generally have low variable expenses.

b. A company with a low operating leverage will generally have high fixed expenses.

c. The net income of a company with a low operating leverage will not be as affected by changes in sales as a company with a high operating leverage.

d. Software companies are examples of companies with low operating leverage.

Sales mix can be described as the:

a. relationship of the firm's variable expenses to its sales.

b. combination of products that make up a company's total sales.

c. relationship of the firm's variable and fixed expenses to its sales.

d. number of items that are sold by a company at its breakeven sales point.

The Board Company sells skateboards and snowboards. A contribution income statement for the company's two products appears below:

	Skateboards	Snowboards	Total
Sales	$25,000	$75,000	$100,000
Variable Expenses	15,000	50,000	65,000
Contribution Margin	$10,000	$25,000	35,000
Fixed Expenses			18,000
Net Income			$17,000

The company has determined that its breakeven sales are about $51,429. If the sales for skateboards stay the same but the sales for snowboards increase by $25,000, what effect would the change in sales mix have on breakeven sales?

a. breakeven sales for the company as a whole would decrease by about $500

b. breakeven sales for the company as a whole would decrease by about $200

c. breakeven sales for the company as a whole would increase by about $200.

d. breakeven sales for the company as a whole would increase by about $500.

After a company has achieved breakeven sales, for any additional sale within the same relevant range, the additional net income will be equal to:

a. the sales per unit times the additional units sold.

b. the contribution margin per unit times the additional units sold.

c. the sales per unit times the additional units sold less fixed expenses.

d. the contribution margin per unit times the additional units sold less fixed expenses.