1 ACCT 2310 2059 95 2 3 The data below is taken from Q Inc.'s monthly records and its only product, Scully. 4 5 Sales ($200 x 600 units) $ 120,000 6 Variable costs ($150 x 600 units) $ 90,000 7 Fixed costs $ 25,000 8 9 LS-5% point each) What is the break-even point in terms of sales quantity? Briefly explain what this means 10 11 12 13 14 15 LOS-3 point each) Compute the contribution margin ratio. Briefly explain what this means. 16 17 18 19 20 21 LOS-6,7% point each) Compute the safety margin. Briefly explain what this means. 22 23 24 25 26 27 LOS-8 (point) Compute the operating leverage factor (1.e., degree of operating leverage) Briefly explain what this means. 28 29 30 31 32 33 34 LOS 4% point each) Compute the change in operating income if management decides to replace fixed labor costing $5,000 with 35 temporary workers costing $25 per unit. These changes would not affect sales volume or sales price. Regardless of your computation, 36 but from a purely value proposition perspective, should management make these changes? Briefly explain 37 38 39 40 41 42 44 NEA 38 39 40 41 42 43 44 45 LOS 1,2,4,9 % point each) Indicate whether each item below is True or False, assuming all else are held constant. 46 47 Increasing sales volume by 10% would increase net income by 10% 48 49 Typically, in a cost volume profit (CVP) graph, the total revenue line starts at the origin and is 50 51 steeper than the total cost line. 52 Decreasing the variable cost per unit would decrease the variable expense ratio. 53 54 In a multiproduct company profit is maximized by shifting more of the sales mix to the 55 product that has a lower contribution contribution margin ratio. 56 57 LOS-8 (1 point) In general, do you think that managers prefer proportionately more fixed (versus variable) costs in times of economie stress Briefly 58 explain by discussing the concepts of operating leverage. 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 Sheet1 +