Chpter 6

Chapter 6 Additional Review Questions

1. Chase Company has provided the following data:
|Sales price |$200 per unit |
|Sales |6,000 units |
|Fixed cost |$300,000 |
|Variable cost |$100 per unit |

If the dollar contribution margin per unit is increased by $10, total fixed cost is decreased by 60,000, and all other factors remain the same, net income will: A) Decrease by $60,000 B) Increase by $60,000 C) Increase by $120,000

D) Increase by $140,000

2. Curtin Company sells a single product. The product has a selling price of $50 per unit and variable expenses of 80% of sales. If the company's fixed expenses total $150,000 per year, then it will have a break-even of:

A) $750,000

B) $187,500

C) $15,000

D) $3,750

3. The following is Aykroyd Corporation's contribution format income statement for last month:
|Sales |$4,000,000 |
|Less variable expenses | 2,800,000 |
|Contribution margin |1,200,000 |
|Less fixed expenses | 720,000 |
|Net income |$ 480,000 |

The company has no beginning or ending inventories. A total of 80,000 units were produced and sold last month. What is the company's margin of safety in dollars?

A) $480,000

B) $1,600,000

C) $2,400,000

D) $3,520,000

4. Using the same information above for Aykroyd Corporation, how many units would the company have to sell to attain target profits of $600,000?

A) 88,000

B) 100,000

C) 106,668

D) 150,000

5. Using the same information in number 3 above for Aykroyd Corporation, if sales increase by 400 units, how much should net income increase?

A) $1,600

B) $6,000