Part 1

Abe, Inc. has a contribution margin of $60,000 and net income of $20,000.

Zeb, Inc. has a contribution margin of $44,000 and net income of $22,000.

Which of the following statements is false?

Multiple Choice

• Abes cost structure has a higher percentage of fixed costs than Zebs cost structure.

• Abes profits are must sensitive to changes in sales.

• Abe's net income grows one third as fast as its sales

• If sales increase, Abe will experience a greater percentage increase in profit than Zeb.

Part 2

Assume the following (1) variable expenses = $287,000, (2) unit sales = 10,000, (3) the contribution margin ratio = 20%, and (4) net operating income = $10,000. Given these four assumptions, which of the following is true?

Multiple Choice

• The total fixed expenses = $57,400

• The break-even point in sales dollars is $308,750

• The total contribution margin = $229,600

• The total sales = $344,400