The margin of safety tells managers A. how much sales would have to increase to hit the target profit. 8 how much profit would drop if sales decreased C how much sales could drop before the firm no longer earns profits D. how much prefit would have to increase to hit target sales. 2. Frank Corp has fixed costs of $300.000 and Net Operating how much will profits increase? income of $150,000. " sales increase 20%, by 2. A. 20% B, 30% C.60% D, 90% costs of $300,000. Knoll is considering increasing the selling price of its units to $60 per unit. The higher sell price is expected to reduce the demand for the product by 3,000 units or 20%. Assume this reduced 3. Knoll, Inc. currently sells 15,000 units a month for $so each, has variable costs of $20 per unit, and fixed demand is within the relevant range. Is this a good idea for Knoli? A. Yes, NOI will increase $30,000. B. Yes, NOI will increase $150,000. C. No, NOI will decrease $150,000. D. No, NOI will decrease $30,000. If a scattergraph contains points that do not fall in a perfect line, A. the relationshi B. this C. the visual fit method and high-low methods should not be used, but least-squares regression can be 4. p between the variables is not good enough to warrant fitting a line to the data. is an indication that there is no relationship whatsoever between the variables. used D. a straight line can still be used to approximate the relationship if a general linear trend can be discerned. Carver Company, a knife producer, produces a product which sells for $40. A variable selling commission of $6 per unit is paid to the salesperson for each unit sold by that person. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and A $7 B. $17 5. tive costs are $4 per unit. The contribution margin per unit is: C. $22 D. $16 6. Mohave, Inc. places a quality assurance logo on each of its units. To use this logo, it must pay the quality assurance firm $5,000 per month plus $1 per unit. The cost to Mohave of using the quality assurance logo would be a: A. fixed cost B. mixed cost C. variable cost D. step cost