MAS Integration Practice Set 2 d.

Unchanged Unchanged

Encircle the letter of the best answer or provide the answer in the space provided. All problem 6. The total contribution margin decreases if sales volume remains the same and:
solving requires solution on a separate sheet of paper. a. fixed expenses increase.
b. fixed expenses decrease.
1. The difference between total sales in dollars and total variable expenses is called: c. variable expense per unit increases.
a. net operating income. d. variable expense per unit decreases.
b. net profit.
c. the gross margin. 7. The break-even in units sold will decrease if there is an increase in:
d. the contribution margin. a. unit sales volume.
b. total fixed expenses.
2. Brasher Company manufacturers and sells a single product that has a positive contribution c. unit variable expenses.
margin. If the selling price and variable expenses both decrease by 5% and fixed expenses do d. selling price.
not change, then what would be the effect on the contribution margin per unit and the
contribution margin ratio? 8. Break-even analysis assumes that:
Contribution Contribution a. total costs are unchanged.
margin per unit margin ratio b. unit variable expenses are unchanged.
a. Decrease Decrease c. variable expenses are nonlinear.
b. Decrease No change d. unit fixed expenses are unchanged.
c. No change Decrease
d. No change No change 9. A company increased the selling price for its product from P1.00 to P1.10 a unit when total
fixed expenses increased from P400,000 to P480,000 and variable expense per unit remained
3. Once the break-even point is reached: unchanged. How would these changes affect the break-even point?
a. the total contribution margin changes from negative to positive. a. The break-even point in units would increase.
b. net income will increase by the unit contribution margin for each additional item sold. b. The break-even point in units would decrease.
c. variable expenses will remain constant in total. c. The break-even point in units would remain unchanged.
d. the contribution margin ratio begins to decrease. d. The effect cannot be determined from the information given.

4. The contribution margin ratio always increases when the: 10. The ratio of fixed expenses to the unit contribution margin is the:
a. variable expenses as a percentage of sales increase. a. break-even point in unit sales.
b. variable expenses as a percentage of sales decrease. b. profit margin.
c. break-even point increases. c. contribution margin ratio.
d. break-even point decreases. d. margin of safety.
11. The break-even point in unit sales increases when variable expenses:
5. If the fixed expenses of a product increase while variable expenses and the selling price a. increase and the selling price remains unchanged.
remain constant, what will happen to the total contribution margin and the break-even b. decrease and the selling price remains unchanged.
point? c. decrease and the selling price increases.
Contribution margin Break-even point d. remain unchanged and the selling price increases.
a. Increase Decrease
b. Decrease Increase
c. Unchanged Increase
12. The margin of safety percentage is computed as: A company has provided the following data:
a. Break-even sales/Total sales. Sales...........3,000 units
b. Total sales - Break-even sales. Sales price......P70 per unit
c. (Total sales - Break-even sales)/Break-even sales. Variable cost....P50 per unit
d. (Total sales - Break-even sales)/ Total sales. Fixed cost......P25,000

13. The margin of safety is equal to: If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by
a. Sales - Net income. 20%, and all other factors remain the same, net income will:
b. Sales - (Variable expenses/Contribution margin). a. increase by P61,000.
c. Sales - (Fixed expenses/Contribution margin ratio). b. increase by P20,000.
d. Sales - (Variable expenses + Fixed expenses). c. increase by P3,500.
d. increase by P11,000.
14. The amount by which a company's sales can decline before losses are incurred is called the:
a. contribution margin ratio. 19. A company has provided the following data:
b. degree of operating leverage. Sales...........3,000 units
c. margin of safety. Sales price......P70 per unit
d. contribution margin ratio. Variable cost....P50 per unit
Fixed cost......P25,000
15. The degree of operating leverage can be calculated as:
a. contribution margin divided by sales. If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other
b. gross margin divided by net income. factors remain the same, net income will:
c. net income divided by sales. a. decrease by P31,875.
d. contribution margin divided by net income. b. decrease by P15,000.
c. increase by P20,625.
16. If company A has a higher degree of operating leverage than company B, then: d. decrease by P3,125.
a. the company A has higher variable expenses.
b. the company A's profits are more sensitive to percentage changes in sales. 20. Last year, Twins Company reported P750,000 in sales (25,000 units) and a net income of
c. the company A is more profitable. P25,000. At the break-even point, the company's total contribution margin equals P500,000.
d. the company A is less risky. Based on this information, the company's:
a. contribution margin ratio is 40%.
17. Marston enterprises sells three chemicals: petrol, septine, and tridol. Petrol's unit b. break-even point is 24,000 units.
contribution margin is higher than septine's which is higher than tridol's. Which one of the c. variable expense per unit is P9.
following events is most likely to increase the company's overall break-even point? d. variable expenses are 60% of sales.
a. The installation of new computer-controlled equipment and subsequent lay-off of
assembly-line workers. 21. Last year, Black Company reported sales of P640,000, a contribution margin of P160,000, and
b. A decrease in tridol's selling price. a net loss of P40,000. Based on this information, the break-even point was:
c. An increase in the overall market demand for septine.
d. A change in the relative market demand for the products, with the increase favoring
petrol relative to septine and tridol.
22.
The break-even point in sales for Rice Company is P360,000 and the company's contribution 29. Wallace, Inc., prepared the following budgeted data based on a sales forecast of P6,000,000:
margin ratio is 30%. If Rice Company desires an income of P84,000, sales would have to total Variable Fixed
Direct materials...........P1,600,000
23. The margin of safety in the Flaherty Company is P24,000. If the company's sales are P120,000 Direct labor................1,400,000
and its variable expenses are P80,000, its fixed expenses must be: Factory overhead ......... 600,000 P 900,000
Selling expenses ......... 240,000 360,000
Administrative expenses .. 60,000 140,000
24. Young Company has a margin of safety percentage of 20%. The break-even point is P400,000 Total ............... P3,900,000 P1,400,000
and the variable costs are 40% of sales. Given this information, the net income is:
What would be the amount of sales dollars at the break-even point?

25. Dodero Company produces a single product which sells for P100 per unit. Fixed expenses
total P12,000 per month, and variable expenses are P60 per unit. The company's sales
average 500 units per month. Which of the following statements is correct?
a. The company's break-even point is P12,000 per month.
b. The fixed expenses remain constant at P24 per unit for any activity level within the
relevant range.
c. The company's contribution margin ratio is 40%.
d. Responses a, b, and c are all correct.
30. Koby Co. has sales of P200,000 with variable expenses of P150,000, fixed expenses of
P60,000, and a net loss of P10,000. How much would Koby have to sell in order to achieve a
net income of 10% of sales?
31. Green Company's variable expenses are 75% of sales. At a sales level of P400,000, the
company's degree of operating leverage is 8. At this sales level, fixed expenses equal:
32. Scott Company's variable expenses are 72% of sales. The company's break-even point in sales
is P2,450,000. If sales are P60,000 below the break-even point, the company would report a:

26. North Company sells a single product. The product has a selling price of P30 per unit and 33. Last year, Perry Company reported profits of P4,200. It's variable expenses totaled P66,000 or
variable expenses of 70% of sales. If the company's fixed expenses total P60,000 per year, P6 per unit. The unit contribution margin was P3.00. The break-even point in units for Perry
then it will have a break-even of: Company is:

34. At a break-even point of 800 units sold, White Company's variable expenses are P8,000 and its
27. Gerber Company is planning to sell 200,000 units for P2.00 a unit and will just break even at fixed expenses are P4,000. What will the Company's net income be at a volume of 801 units?
this level of sales. The contribution margin ratio is 25%. What are the company's fixed
expenses?
35. The following information pertains to Rica Company:
Sales (50,000 units)..................P1,000,000
28. Marling Corporation has budgeted the following data: Manufacturing costs:
Variable...............................340,000
Expected sales.......P600,000 Fixed...................................70,000
Variable expenses.....420,000 Selling and admin. expenses:
Fixed expenses........120,000 Variable................................10,000
Fixed...................................60,000
What is the break-even in sales dollars?
How much is Rica's break-even point in number of units?