132.How much sales are required to earn a target income of $160,000 if total fixed costs are$200,000 and the contribution margin ratio is 40%? a.$600,000b.$400,000c.$900,000d.$660,000Ans: C, LO: 7, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:Problem Solving, IMA: Quantitative MethodsSolution: ($160,000 $200,000) / .4 $900,000 133.Farmers’ Industries has fixed costs of $400,000 and variable costs are 60% of sales. Howmuch will Farmers report as sales when its net income equals $40,000? 134.Murphy Company produces flash drives for computers, which it sells for $20 each. Eachflash drive costs $8 of variable costs to make. During April, 700 drives were sold. Fixedcosts for April were $4 per unit for a total of $2,800 for the month. How much doesMurphy’s operating income increase for each $1,000 increase in revenue per month? $600 18 - 26
Cost-Volume-Profit 135.Greg’s Golf Carts produces two models: Model 24 has sales of 500 units with acontribution margin of $40 each; Model 26 has sales of 350 units with a contributionmargin of $50 each. If sales of Model 26 increase by 100 units, how much will profitchange? 136.Wendy Industries produces only one product. Monthly fixed expenses are $12,000,monthly unit sales are 2,500, and the unit contribution margin is $10. How much ismonthly net income? a.$25,000b.$37,000c.$0d.$13,000Ans: D, LO: 7, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:Problem Solving, IMA: Quantitative MethodsSolution: ($10 $2,500) $12,000 $13,000 137.A company desires to sell a sufficient quantity of products to earn a profit of $300,000. Ifthe unit sales price is $20, unit variable cost is $12, and total fixed costs are $600,000,how many units must be sold to earn net income of $300,000?
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