1) Florek Inc. produces and sells a single product. The company has provided its contribution...

1) Florek Inc. produces and sells a single product. The company has provided its contribution format income statement for March. Sales (6,500) : $292,500 Variable Expenses $195,000 Contribution Margin 97,500 Fixed Expenses 88,200 Net Operating Income $9,300 If the company sells 6,700 units, its net operating income should be closest to: a) $9,300 b) $12,300 c) $18,300 d) $9,586 2) Arthur Corporation has a margin of safety percentage of 25% based on its actual sales. The break-even point is $366,000 and the variable expenses are 45% of sales. Given this information, the actual profit is: a) $50,325 b) $18,300 c) 97,600 d) $67,100 3) Data concerning Wang Corporation's single product appear below: Selling Price Per Unit $240 Variable Expense Per Unit $76.80 Fixed Expense Per Month $146,880 The break-even in monthly dollar sales is closest to: a) $216,000 b) $146,880 c) $432,000 d) $285,120 4) The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $29,000. If sales increase by $86,000, the company's net operating income will increase by: a) $74,750 b) $26,900 c) $1,100 d) $30,100 5) Minist Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $260,000 and its net operating income was $17,000. If fixed expenses totaled $87,000 for the year, the break-even point in unit sales was: a) 7,800 b) 10,875 c) 13,000 d) 13,850

(1)

The correct option is b(12,300)

Sales: 301,500

Less-VC: (201,000)

Contribution: 100,500

Less-Fixed Expenses: (88,200)

NOI: 12,300

As,

{eq}\begin{align*} {\rm{S}}& = {\rm{Units\;Sold}}\left( {Sales\;per\;unit} \right)\\ & = 6700\left( {45} \right)\\ & = 301,500\\ {\rm{VC}} &= {\rm{Units\;Sold}}\left( {VC\;per\;unit} \right)\\ & = 6700\left( {30} \right)\\ &= 201,000\\ \end{align*} {/eq}

(2)

The correct option is d(67,100)

{eq}\begin{align*} {\rm{MOS}} &= {\rm{AS}} - {\rm{BEPS}}\\ 366,000& ={\rm{AS}} - 0.25\;of\;AS\\ 366,000 &= 0.75\;of\;AS\\ {\rm{AS}}& = \dfrac{{366,000}}{{0.75}}\\ &= 488,000 \end{align*} {/eq}

{eq}\begin{align*} {\rm{FC}} &={\rm{BEPS}} \times {\rm{PV\;Ratio}}\\ & = 366,000 \times \left( {100\% - 45\% } \right)\\ & = 366,000\left( {55\% } \right)\\ &= 201,300 \end{align*} {/eq}

{eq}\begin{align*} {\rm{AP}}& = {\rm{Sales}} - {\rm{VC}} - {\rm{FC}}\\ & = 488,000 - 219,000 - 201,300\\ & = 67,100 \end{align*} {/eq}

(3)

The correct option is a(216,000)

{eq}\begin{align*} {\rm{C}}& ={\rm{S}} - {\rm{VC}}\\ & = 240 - 76.80\\ & = 163.2 \end{align*} {/eq}

{eq}\begin{align*} {\rm{Break\;Even\;sales}} &= \dfrac{{{\rm{FC}}}}{{{\rm{C}}}} \times SP\\ & = \dfrac{{146,880}}{{163.2}}\left( {240} \right)\\ & = 216,000 \end{align*} {/eq}

(4)

The correct option is b(26,900)

{eq}\begin{align*} {\rm{Ratio}} &= 1 - {\rm{VC}}\\ & = 1 - 0.35\\ & = 0.65\\ {\rm{NOI\;Increase}} &= \left( {0.65} \right)\left( {86,000} \right) - 29,000\\ & = 55,900 - 29,000\\ & = 26,900 \end{align*} {/eq}

(5)

The correct option is b(10875)

Particulars	Total	Per unit
Sales(13,000units)	260,000	20
Less-VC	156,000	12
Contribution	104,000	8

{eq}\begin{align*} {\rm{BEP(units)}}& = \dfrac{{{\rm{FC}}}}{{{\rm{Contribution\;per\;unit}}}}\\ & = \dfrac{{87,000}}{8}\\ &= 10875 \end{align*} {/eq}

Here,

FC is fixed cost.

VC is variable cost.

BEP is break even point.

SP is selling price.

MOS is margin of safety.

AS is actual sales.

AP is actual profit.