33 What will be the effect on the contribution margin ratio

33) What will be the effect on the contribution margin ratio if the selling price per unit decreases and variable cost per unit remains the same? A) It will remain the same. B) It will decrease. C) It will increase. D) It is impossible to determine with the given information. 34) SB Corp. manufactures widgets. The company has the capacity to produce 100,000 widgets per year, production currently produces and sells 75,000 widgets per year. The following information relates to current Sale price per unit Variable costs per unit: $41 $24 Manufacturing and administrative Total fixed costs: Manufacturin $80,000 $23,000 and fixed costs increase by $13,000, If a special sales order is accepted for 8100 widgets at a price of $39 per unit, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A) Increase by $108,500 C) Decrease by $68,000 B) Increase by $94,000 D) Increase by $68,000 35) On a production cost report, where would current costs added during the period appear? A) After any beginning WIP Inventory cost C) After any ending WIP Inventory cost B) As part of beginning WIP Inventory cost D) As part of unit output for the period 36) Portable Power Inc. buys portable generators for $470 and sells them for $750. They pay a sales commission of 5% ofsales revenue to their sales staff. Portable Power Inc. pays $6,000 a month rent for their store, and also pays $1,800 a month to their staff in addition to the commissions. Portable Power Inc. sold 600 generators in June. If Portable Power Inc prepares a contribution margin income statement for the month of June, what would be their operating income? A) $153,300 B) $304,500 C) $137,700 D) $450,000 37) Total predicted sales (in units) minus total breakeven sales in units divided by total predicted sales (in units) yields A) contribution margin ratio. contribution margin per unit. B) percent of sales mix. D) margin of safety percentage

Solution

Answer 33

If the selling prices per unit decreases and variable cost remains the same, contribution margin per unit decreases. This results in reduction in Contribution Margin Ratio

Answer 34

Answer 35

Current Cost incurred during the period will appear after any beginning WIP Inventory Cost

Answer 36

Answer 37

Total Predicted Sales (Units) minus total breakeven sales in units divided by total predicted sales (in units) yields margin of Safety percentage

Selling Price for Special Order	39
Variable Costs:
Manufacturing	24
Marketing & Admin.	5
Cotribution Margin per unit	10
Total Units Sold under Special Order	8,100
Increase in Contrbution	81,000
Increase in Fixed Cost	13,000
Net Increase in Operating Income	68,000