Question 122 points Costplus pricing adds an amount to The c

Question 12(2 points, Cost-plus pricing adds an amount to )The cost of the product or service to cover operating costs and contribute to its proft 2 Variable and fixed costs to cover 3) The sales price to cover unexpected costs 4 Contribution margin to cover fixed costs. Question 8(2 points) On the breakeven graph, any level of sales to the right of the breakeven point represents 1 Fixed cost 2 Variable cost. 3) Operating income. 4) Operating loss Question 9 (2 points) Assume Buddy\'s Farm Supply wants to make $45,000 in net income. If the tax rate is 25%, howw much operating income must Buddy have? 1$56,250 2 $60,000 3) $180,000 4) $360000 Question 10 (2 points) Brandis Bakery\'s inconse statement for last month is given below. What is Brandi\'s degree of operating leverage? Contribatien margin 7500 1) 0.2 2) 1.4 3) 3.5 4) 5.0 Question 11 12 points) The selling price of a unit is $20 and the variable product cost per unit is $14. In addition,a sales commission of 5% is paid on each sale. If the variable cost per unit lexcluding sales commission) increases by 1%. what will be the new, contribution margin? 1) $4.86 2) $5.10 3) $5.16 4) $6.00 Question 6 (2 points) Which of the following formulas is used to calculate the breakeven peint in units 1) Total fixed costs divided by contribution margin per unit. 2) Total fxed costs divided by total contribution margin. 3) Total fixed costs divided by contribution margin ratio ?4 Nome of these formulas calculates the breakrven point in units Question 72 points A company with a high optrating leverage wil experience A large percentage change in operating income as a result of a small percentage change in sales. 2) A small percentage change in operating income as a result of a smal percentage 3) The sarne percentage change in operating income as a result of a percentage chango in 4) A small percentage change in operating income as a result of a large percentage change in sales sales. change in sales

Solution

Answers

Correct answer is Option 1: The cost of the product or services to cover operating cost and contributes to its profit is the amount added as Cost plus pricing.

Cost plus Pricing = Cost of the product and services + Profit required to be earned = Sales Price.

Correct answer is Option 3^rd: Operating Income.

At Break Even Level, Contribution margin equals Fixed cost.

Below BE level there will be Operating losses, and above (right side on graph) BE level, there will be Operating Income.

Correct answer is Option 2^nd: $ 60,000

Net Income = $ 45,000 which is after 25% tax. Hence, this net Income must equals 75% of the Operating Income.

Operating Income = $ 45,000 / 75% = $ 60,000

Correct answer is Option 3^rd: 3.5

Degree of Operating Leverage = Contribution margin / Operating Income

= 175000 / 50000 = 3.5

Correct answer is Option 1: $ 4.86

Contribution margin = Sales Price – Variable cost – Sales Commission

= $ 20 – ($ 14 + 1%) – ($ 20 x 5%)
= 20 – 14.14 – 1
= $ 4.86

Correct answer is Option 1^st: Total fixed cost / contribution margin per unit.

Correct answer is Option 1^st: A larger % change in Operating income will be experienced as a result of small % change in sales.