The company is considering the use of higher quality

11. The company is considering the use of higher quality direct materials, which would increase direct
material cost from $6 per unit to $8 per unit. If this change were made without changing the selling
price, it is believed that unit sales would increase by 10%. If this occurred, net operating income
would be:
a. $100,000.
b. $210,000.
c. $170,000.
d. $140,000.
Use the following information for the next TWO questions:
The following information relates to FCG Company:
Degree of operating leverage
Margin of safety $25,000
Margin of safety percentage 25%
Contribution margin ratio 40%
12. If FCG ’s sales increase by 10%, by what percentage will its net operating income increase?
4
13. FCG wants to give its only salesman a $3,000 salary increase. If FCG gives this increase, by how
much would sales at FCG have to increase in order for the company to maintain its current net
operating income level?
14. What term is used to describe the amount of sales above the break-even point? 15. Cost-volume-profit analysis assumes that:
a. total fixed costs remain constant.
b. selling prices must increase in order to generate more revenue.
c. variable costs per unit must decrease in order to generate more profit.
d. Exactly two of the above are correct.

16. XPA Inc. sells a single product for $22 per unit. Variable costs are $10 per unit, and the fixed costs
are $30,000 per year. XPA expects to sell 12,000 units in 2018. The profit for each unit sold above the
breakeven point is:
17. Gustavo Inc. has a breakeven point of 20,000 units. The selling price is $20 per unit and total fixed
costs are $180,000. In 2018 when Gustavo sold 25,000 units, total variable costs were:
18. Which of the following would cause break-even point in units to decrease?
Practice Exam 2B - Page 4 of 9