29 Jun stion 61. The following information relates to Day Company:
Question
61. The following information relates to Day Company:
Sales revenue
$12,000,000
Contribution margin
4,800,000
Net income
800,000
Day’s operating leverage factor is:
A. 0.067.
B. 0.167.
C. 0.400.
D. 2.500.
E. 6.000.
62. The following information relates to Paterno Company:
Sales revenue
$10,000,000
Contribution margin
4,000,000
Net income
1,000,000
If a manager at Paterno desired to determine the percentage impact on net income of a given percentage change in sales, the manager would multiply the percentage increase/decrease in sales revenue by:
A. 0.25.
B. 0.40.
C. 2.50.
D. 4.00.
E. 10.00.
Use the following to answer questions 63-64:
Edco Company produced and sold 45,000 units of a single product last year, with the following results:
Sales revenue
$1,350,000
Manufacturing costs:
Variable
585,000
Fixed
270,000
Selling costs:
Variable
40,500
Fixed
54,000
Administrative costs:
Variable
184,500
Fixed
108,000
63. Edco’s operating leverage factor was:
A. 4.
B. 5.
C. 6.
D. 7.
E. 8.
64. If Edco’s sales revenues increase 15%, what will be the percentage increase in income before income taxes?
A. 15%.
B. 45%.
C. 60%.
D. 75%.
E. An amount other than those above.
65. When advanced manufacturing systems are installed, what effect does such installation usually have on fixed costs and the break-even point?
Fixed Costs
Break-even Point
A.
Increase
Increase
B.
Increase
Decrease
C.
Decrease
Increase
D.
Decrease
Decrease
E.
Do not change
Does not change
66. Which of the following statements is (are) true regarding a company that has implemented flexible manufacturing systems and activity-based costing?
I. The company has erred, as these two practices used in conjunction with one another will severely limit the firm’s ability to analyze costs over the relevant range.
II. Costs formerly viewed as fixed under traditional-costing systems may now be considered variable with respect to changes in cost drivers such as number of setups, number of material moves, and so forth.
III. As compared with the results obtained under a traditional-costing system, the concept of break-even analysis loses meaning.
A. I only.
B. II only.
C. III only.
D. I and II.
E. II and III.
67. A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income. How much should the firm add to fixed costs when figuring the sales revenues necessary to produce this income level?
A. $200,000.
B. $300,000.
C. $500,000.
D. $833,333.
E. $1,250,000.
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