1. Jazz Products has the following information available for the month of March:
Sales (4,000 units) $40,000
Variable costs 18,000
Fixed costs 5,000
Net income $17,000
The company's manager is considering several options to increase net income. By what amount do sales dollars need to increase in order for net income to increase by $8,000 to $25,000?
a. $14,545
b. $25,000
c. $3,000
d. $18,820
THE FOLLOWING INFORMATION RELATES TO FINANCIAL PROJECTIONS OF JARVIS COMPANY:
Projected sales 60,000 units
Projected variable costs $2.00 per unit
Projected fixed costs $50,000 per year
Projected unit sales price $7.00
2. If Jarvis Company achieves its projections, what will be its degree of operating leverage?
a. 6.00
b. 1.20
c. 1.68
d. 2.40
3. Assuming a company has net income, with the sale of each additional unit, net income will increase by the __________ .
a. contribution margin ratio
b. contribution margin per unit
c. sales price per unit
d. fixed cost per unit
4. Kramer Company expects the following results this year:
Sales $300,000
Variable costs $220,000
Fixed costs $50,000
Expected production and sales 2,000 units
The sales manager believes sales could be increased by 200 units if advertising expenditures were increased by $6,000. If advertising expenditures are increased and sales increase by 200 units, the effect on operating income will be a(n)
a. increase of $24,000
b. decrease of $6,000
c. increase of $2,000
d. decrease of $3,000
5. The operation of Cunningham Corporation are divided into the Davis Division and the Rockford Division. Projections for the next year are as follows:
Davis Rockford
Division Division Total
Sales $500,000 $360,000 $860,000
Less: Variable costs 180,000 200,000 380,000
Contribution margin $320,000 $160,000 $480,000
Less: Direct fixed costs 150,000 125,000 275,000
Segment margin $170,000 $35,000 $205,000
Less: Allocated common costs 70,000 55,000 125,000
Operating income (loss) $100,000 $(20,000) $80,000
Operating income for Cunningham Corporation, as a whole, if the Rockford Division were dropped would be
a. $45,000
b. $80,000
c. $100,000
d. $120,000
6. Galaxy Industries manufactures 15,000 components per year. The manufacturing cost of the components was determined to be as follows:
Direct materials $150,000
Direct labor 240,000
Variable manufacturing overhead 90,000
Fixed manufacturing overhead 120,000
Total $600,000
Assume Galaxy Industries could avoid $40,000 of fixed manufacturing overhead if it purchased the component from an outside supplier. An outside supplier has offered to sell the component for $34. If Galaxy purchases the component from the supplier instead of manufacturing it, the effect on income would be a
a. $60,000 increase
b. $10,000 increase
c. $100,000 decrease
d. $140,000 increase