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