. Information concerning Label Corporation\'s operations follows: Sales Variable

Question

. Information concerning Label Corporation's operations follows: Sales Variable expenses Contribution margin Fixed expenses Degree of operating leverage Contribution margin ratio $300,000 1.5 0.2 Assuming that Label increased sales by $90,000 (by 3096) and fixed expenses remain the same, by what amount or percent will net operating income increase? A) $18,000 B) $27,000 C) 20% D) 30% 9. Which of the following is not achieved as a benefit of budgeting? A) A budget forces managers to think ahead for better planning. B) A budget provides a basis for performance evaluation. C) Budgeting allows the company to eliminate accounting personnel D) Budgeting opens up lines of communication within the company. 10. Which of the following is the most logical sequence of master budget preparation? A) Production >Sales >Cash->Budgeted financial statements B) Budgeted financial statements> Sales-> Cash >Production C) Cash > Production > Budgeted financial statements Sales D) Sales> Production>Cash> Budgeted financial statements 11. The cash budget is supposed to show which of the following? I) Cash collections from sales Il) Repayment or borrowings, if any III) Amount of material purchases IV) Depreciation expense A) I only B) I and II C) I, II, and III D) I, II, III, and IV 12. In the direct material budget, production needs means A) the quantity of the material to be used in production B) the number units of product to be manufactured C) the number of workers to be employed in production D) the percentage of production facilities to be used in production

Explanation / Answer

Question 8 Answer A) $18,000 Explanation Sales (300,000X130%)     3,90,000 Variable Expenses (240,000X130%)     3,12,000 Contribution Margin         78,000 Fixed Expenses         20,000 Net operating Income         58,000 Previous Operating Income         40,000 Increase in Net operating Income         18,000 Question 9 C) Budgeting allows the company to eliminate accounting personnel Question 10 A)Production -> Sales -> Cash -> Budgeted financial statements Question 11 B) I and II Question 12 A) the quantity of the material to be used in Production

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