Answered: f sales are $425,000, variable costs…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...

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Question

If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, what is the contribution margin ratio?

a.26.8%

b.11.8%

c.38%

d.62%

Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are $600,000, and fixed costs are $130,000. How much will operating income change if sales increase by $40,000?

a.$8,000 decrease

b.$8,000 increase

c.$30,000 decrease

d.$30,000 increase

If fixed costs are $297,000, the unit selling price is $70, and the unit variable costs are $45, what are the old and new break-even sales (units) if the unit selling price increases by $8?

a.6,600 units and 8,500 units

b.11,880 units and 9,000 units

c.11,880 units and 4,243 units

d.4,243 units and 11,880 units

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