3-16 Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000? a. 5,625 b. 4,445 c. 3,750 d. 3,333 3-17 During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ’s: a. Contribution margin and gross margin will be lower. b. Contribution margin will be higher, while its gross margin will remain the same. c. Operating income will be the same under both the financial accounting income statement and contribution income statement. d. Inventory amounts booked under the financial accounting income statement will be lower than under the contribution income statement. 3-18 Under the contribution income statement, a company’s contribution margin will be: a. Higher if fixed SG&A costs decrease. b. Higher if variable SG&A costs increase. c. Lower if fixed manufacturing overhead costs decrease. d. Lower if variable manufacturing overhead costs increase. 3-19 A company needs to sell 10,000 units of its only product in order to break even. Fixed costs are $110,000, and the per unit selling price and variable costs are $20 and $9, respectively. If total sales are $220,000, the company’s margin of safety will be equal to: a. $0 b. $20,000 c. $110,000 d. $200,000
3-16 Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the income
tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need
to sell to produce a net income of $15,000?
a. 5,625 b. 4,445
c. 3,750 d. 3,333
3-17 During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed
SG&A expenses the same. As a result, XYZ’s:
a. Contribution margin and gross margin will be lower.
b. Contribution margin will be higher, while its gross margin will remain the same.
c. Operating income will be the same under both the financial accounting income statement and contribution
income statement.
d. Inventory amounts booked under the financial accounting income statement will be lower than under
the contribution income statement.
3-18 Under the contribution income statement, a company’s contribution margin will be:
a. Higher if fixed SG&A costs decrease.
b. Higher if variable SG&A costs increase.
c. Lower if fixed
d. Lower if variable manufacturing overhead costs increase.
3-19 A company needs to sell 10,000 units of its only product in order to break even. Fixed costs are
$110,000, and the per unit selling price and variable costs are $20 and $9, respectively. If total sales are
$220,000, the company’s margin of safety will be equal to:
a. $0 b. $20,000
c. $110,000 d. $200,000
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