Question

1. Beaucheau Farms sells three products (E,F, and G) with a sale mix ratio of 3:1:2. Unit sales are shown below. What is the sales price per composite unit?

Product E                Product F                        Product G

       $11                            $8                                        $9

a. $59.00

b. $28.00

c. $20.00

d. $41.00

2. Wallace Industries has a total contribution margin of $58,560 and net income of $24,400 for the month of April. Wallace expects sales volume to increase by 5% in May. What are the degree of operating leverage and the expected percent change in income for Wallace Industries?

a. 2.5 and 13%

b. 1.42 and 5%

c. 0.42 and 2.2%

d. 2.4 and $12%

3. If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month, what is their degree of leverage?

a. 2.4

b. 0.18

c. 1.18

d. 4.7

Answer 1

Ans:

1Ans:$59 is Correct answer

Product E	3	11	$       33.00
Product F	1	8	$       8.00
Product G	2	9	$       18.00
The Selling Price per Component(33+8+18)	$    59.00

2. Correct option is (D) 2.4 to 12

Degree of operating leverage = Contribution margin/Net income

= 58,560/24,400

= 2.4

Increase in operating income = Increase in sales x Degree of operating leverage

= 5 x 2.4

= 12%

Correct option is (D)

3.D.4.7 is Correct Answer

Degree of operating leverage = Contribution margin/Net income

= 59,690/12,700

=4.7

Hope this helped ! Let me know in case of any queries.