33) What will be the effect on the contribution margin ratio if the selling pric

Question

33) What will be the effect on the contribution margin ratio if the selling price per unit decreases and variable cost per unit remains the same? A) It will remain the same. B) It will decrease. C) It will increase. D) It is impossible to determine with the given information. 34) SB Corp. manufactures widgets. The company has the capacity to produce 100,000 widgets per year, but it currently produces and sells 75,000 widgets per year. The following information relates to current production Sale price per unit $41 Variable costs per unit Manufacturing Marketing and administrative $24 Total fixed costs: Manufacturing Marketing and administrative $80,000 $23,000 If a special sales order is accepted for 8100 widgets at a price of $39 per unit, and fixed costs increase by $13,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A) Increase by $108,500 C) Decrease by $68,000 B) Increase by $94,000 D) Increase by $68,000 35) On a production cost report, where would current costs added during the period appear? A) After any beginning WIP Inventory cost C) After any ending WIP Inventory cost B) As part of beginning WIP Inventory cost D) As part of unit output for the period 36) Portable Power Inc. buys portable generators for $470 and sells them for $750. They pay a sales commission of 5% ofsales revenue to their sales staff. Portable Power Inc. pays S6,000 a month rent for their store, and also pays $1,800 a month to their staff in addition to the commissions. Portable Power Inc. sold 600 generators in June. If Portable Power Inc prepares a contribution margin income statement for the month of June, what would be their operating income? A) $153,300 B) $304,500 C) $137,700 D) $450,000 37) Total predicted sales (in units) minus total breakeven sales in units divided by total predicted sales (in units) yields A) contribution margin ratio. B) percent of sales mix. D) margin of safety percentage. contribution margin per unit.

Explanation / Answer

Ans 33 b) It will decrease As CM is sales-variable cpost so any increase in selling price decreases contribution margin ans 34 Sales (8100*39) 315900 Less: relevant cost Variable cost (29*8100) 234900 Fixed cost 13000 Increase in profit by 68000 Option D is correct ans 35 Option A After any beginning WIP inventory cost ans 36 Sales (600*750) 450000 Less: variable cost Cost of good sold (470*600) 282000 Commission 450000*5% 22500 CM 145500 Less: fixed cost (6000+1800) 7800 Net operating Incoem 137700 Option C is correct $137700 ans 37 D) Margin of safety %

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