Question :
Short Answer Questions
Paulsen Company sells only one product. The regular : 1229574
Short Answer Questions
Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month.Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.
133. At the original selling price of $50 per unit, what is the contribution margin ratio?
134. At the original selling price of $50 per unit, how many units must Paulsen sell to break even?
135. At the original selling price of $50 per unit, what dollar volume of sales per month is required for Paulsen to earn a monthly operating income of $5,000?
136. At the increased selling price of $55 per unit, what is the contribution margin ratio?
137. At the increased selling price of $55 per unit, what dollar volume of sales per month is required to break-even?
Fill in the Blank Questions
Rhinefold brews reduced calorie beer and regular beer. Sales of its reduced calorie beer represent 25% of the company’s total revenue. Sales of regular beer represent the remaining 75%. Reduced calorie beer has a contribution margin ratio of 80%, whereas the contribution margin ratio of regular beer is only 60%. Rhinefold’s monthly fixed costs average $609,500.
138. What is the company’s monthly break-even point expressed in sales dollars? $___________
139. What monthly sales level must be achieved for Rhinefold to earn a monthly operating income of $350,000? $___________
140. If Rhinefold generates $1,400,000 in monthly sales, it will earn a monthly operating income of $__________.
141. Assume Rhinefold’s margin of safety was $300,000 in May. What was the company’s operating income in May? $__________.
142. If Rhinefold’s monthly fixed costs increase by $8,500, what level of monthly sales revenue will be required to break-even? $__________.
Multiple Choice Questions
143. During the current year, the net sales of Ridgeway, Inc. were 10 percent below last year’s level. You should expect Ridgeway’s semivariable costs to: A. Decrease in total, but increase as a percentage of net sales.B. Increase in total, and increase as a percentage of net sales.C. Decrease in total, and decrease as a percentage of net sales.D. Increase in total, but decrease as a percentage of net sales.
144. Marston Company sells a single product at a sales price of $50 per unit. Fixed costs total $15,000 per month, and variable costs amount to $20 per unit. If management reduces the sales price of this product by $5 per unit, the sales volume needed for the company to break even will: A. Increase by $5,000.B. Increase by $4,500.C. Increase by $2,000.D. Remain unchanged.
145. Olsen Auto Supply earns a contribution margin ratio of 40 percent. The store manager estimates that by spending an additional $5,000 per month for radio advertising, the store will be able to increase its operating income by $3,000 per month. The manager is expecting the radio advertising to increase monthly sales volume by: A. $12,500.B. $8,000.C. $7,500.D. $20,000.
146. Shown below are the monthly high and low levels of direct labor hours and of total manufacturing overhead for Apex Mfg. Co.: In a month in which 5,000 direct labor hours are used, the fixed element of total manufacturing overhead costs should be approximately: A. $15,500.B. $8,000.C. $7,500.D. $8,000 plus $1.50 per unit.
147. Driver Company manufactures two products. Data concerning these products are shown below: If the company’s fixed costs are $320,000, what level of sales must it generate to break-even? A. $914,286.B. $457,143.C. $320,000.D. $1,000,000.
