Question :
21) Explain net income and what implications can tax have : 1212038
21) Explain net income and what implications can tax have on it that influences a manager’s decision?
Objective 3.4
1) Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.
A) fixed costs increases by $6 per unit
B) operating profits decreases by $6 per unit
C) fixed costs decreases by $6 per unit
D) operating profits increases by $6 per unit
2) Which of the following forms a part of decision making in CVP analysis?
A) selection of inventory method for financial reporting purposes
B) decision to form a capital policy
C) decision to advertise
D) decision to improve the efficiency of the work force
3) All else being equal, a reduction in selling price will ________.
A) increase contribution margin
B) reduce fixed costs
C) increase variable costs
D) reduce operating income
4) All else being equal, an increase in advertising expenditures will ________.
A) reduce operating income
B) reduce contribution margin
C) increase variable costs
D) increase selling price
5) Blistre Company operates on a contribution margin of 20% and currently has fixed costs of $500,000. Next year, sales are projected to be $3,000,000. An advertising campaign is being evaluated that costs an additional $80,000. How much would sales have to increase to justify the additional expenditure?
A) $320,000
B) $380,000
C) $400,000
D) $600,000
6) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500
units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?
A) 1,698 units
B) 1,500 units
C) 1,550 units
D) 1,339 units
7) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500
units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented ________.
A) operating income will decrease by $9,500
B) operating income will increase by $10,000
C) operating income will decrease by $6,000
D) operating income will increase by $11,300
8) Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a $10,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure.
A) 123 units
B) 134 units
C) 243 units
D) 143 units
