ACCT 2401 TEST PREP CHAPTERS 5 AND 10| EAST CAROLINA UNIVERSITY

ACCT 2401 TEST PREP CHAPTERS 5 AND 10Chapters 5 & 10 Test Prep For Questions 1-3 use the following data: Pringle Company sells a single product. The company’s sales and expenses are as follows: Sales $600,000 $40 Less variable expenses 420,000 28 Contribution margin 180,000 12 Less fixed expenses 150,000 Net Income $ 30,000 1. What is the break-even in units sold and in dollars? 2. Without computations, what is the total contribution margin at breakeven? 3. How many units would have to be sold to earn a profit of $18,000? 4. Information concerning Label Corporation’s operations follow: Sales $300,000 Variable expenses 240,000 Fixed expenses 40,000 Assuming that Label increased sales by 20%, what should net operating income be? A) $20,000 B) $24,000 C) $32,000 D) $80,000 5. Pool Company’s variable expenses are 36% of sales. Pool is contemplating an advertising campaign that will cost $20,000. If sales increase by $80,000, the company’s net operating income should increase by: A) $28,800 B) $64,000 C) $ 8,800 D) $31,200 6. At a break-even point of 800 units sold, White Company’s variable expenses are $8,000 and it’s fixed expenses are $4,000. What will the Company’s net income be at a volume of 801 units? a. $15 b. $10 c. $5 d. $20 Use the following information to answer the next three questions (and assume the questions are independent): Prince Company’s most recent income statement is shown below: Sales (13,500 units) $270,000 Less Variable Costs 189,000 Contribution Margin $81,000 Less Fixed Costs 90,000 Net Loss ($9,000) 7. If Prince increases its selling price by 20 percent and decreases its variable costs by 20 percent, what is the impact on Prince’s contribution margin? a. The contribution margin will remain the same. b. The contribution margin will increase by 40%. c. The contribution margin will be $151,200. d. The contribution margin will be $172,800. 8. What is Prince’s net income (or loss) if the sales volume increases by 20%, fixed expenses increase by $30,000, and variable costs decreases by 5%? a. $(11,460) b. $(14,450) c. $18,540 d. $24,450 9. What is the impact on Prince’s net income if the selling price decreases by 10%, sales volume increases by 30%, and fixed cost increase by $10,000? a. An increase of $8,100. b. An increase of $10,800. c. A decrease of $20,800. d. A decrease of $29,800. 10. The break-even point is the point where a. total sales revenue equals total expenses, variable and fixed. b. total contribution margin equals total fixed expenses. c. both a and b are true. d. neither a nor b is true. 11. The break-even point in units is calculated using a. fixed expenses and the contribution margin ratio. b. variable expenses and the contribution margin ratio. c. fixed expenses and the unit contribution margin. d. variable expenses and the unit contribution margin.