Spring 2018 Chapter 6 Review Questions
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Degree of operating leverage is calculated as
a) Net income divided by contribution margin
b) Break-even sales divided by net income.
c) Net income divided by break-even sales.
d) Contribution margin divided by net income
N Company sells two products. Product A sells for $100 per unit, and has unit
variable costs of $60. Product B sells for $70 per unit, and has unit variable
costs of $50. Currently, N Company sells three units of product A for every one
unit of product B sold. N Company has fixed costs of $750,000. How many
units would N Company have to sell to earn a profit of $300,000?
a) 7,500 units of A and 22,500 units of B
b) 22,500 units of A and 7,500 units of B
c) 17,600 units of A and 12,400 units of B
d) 12,400 units of A and 17,600 units of B
Pear Company sells three products. Pear is having difficulty making all of the
required products because it only has limited hours available on the machine
that is used to produce all products. Determine the order in which the
products should be made to produce the most profit based on the below
information.
a) Tablets, Phones, Computers
b) Computer, Phones, Tablet
c) Phones, Computer, Tablet
d) Computer, Tablet, Phone
Goat Company provide the following CVP income statement. What is the
degree of operating leverage?