Question

1)

Cincinnati Supply Corp. has supplied the following data on its organic fertilizer product:

Bags produced and sold: 240,000 units

Sales revenue: $1,896,000

Variable manufacturing expenses: $804,000

Fixed manufacturing expense: $520,000

Variable selling and administrative expense: $180,000

Fixed selling and administrative expense: $270,000

Net operating income: $122,000

The company's per unit contribution margin is closest to:

a).$3.80 per unit b).$7.15 per unit c).$4.55 per unit d).$4.10 per unit

2).Cincinnati Supply Corp., a supplier to Kraft Foods, produces and sells a single product. Data concerning that product appear below:

Selling price per unit: $230.00

Variable expense per unit: $73.60

Fixed expense per month: $542,708

The break-even in monthly unit sales is closest to:

a). 2,360 b).7,374 c).3,470 d).4,401

3).Cincinnati Supply Corp., a supplier to Kraft Foods, produces and sells a single product. Data concerning that product appear below:

                                                             Per unit

Selling price                                        $110

Variable expense                                   66

Contribution Margin                     $ 44

The company is currently selling 5,000 units per month. Fixed expenses are $173,000 per month. The marketing manager believes that a $6,000 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

a).increase of $1,480 b). decrease of $1,480 c). decrease of $6,000 d). increase of $7,480

4).Cincinnati Supply Corp., a supplier to Kraft Foods, provided its contribution format income statement for January. The company produces and sells a single product.

                                              Q4,400 units

Sales                                        $211,200

Variable expense              127,600

Contribution margin     $ 83,600

Fixed expense                         66,400

Net operating income    $ 17,200

If the company sells 4,700 units, its total contribution margin should be closest to:

a).$89,300 b). $98,000 c).$18,373 d). $83,600

Answer 1

Answers

1) A) $3.80 Per Unit

2) C) 3,470 Units

3) A) Increase of $1,480

4) A) 89,300

1)

Contribution Margin = sales -Variable cost = 1896,000-804,000-180,000 = 912,000

Contribution MArgin Per Unit = 912,000/240,000 = $3.80 Per Units

2)

Break Even Units = Fixed cost /(selling Price - Variable cost)

= 542,708/(230-73.60) = 3,470 Units

3)

increase in Contribution Margin = 170*44 = $7,480

Increase in Fixed cost = 6,000

answers : Increase in Profit = 7,480-6000 = Increase of 1,480

4)

contribution Margin at 4,700 units = 83,600/4400*4700 = 89,300