a. James Shaw owns several shaved ice stands that operate in the summer along the Outer Banks of North Carolina. His contribution margin ratio is 60%. If James increases his sales revenue by $25,000 without any increase in fixed costs, by how much will his operating income increase? (a) $25,000; (b) $15,000; (c) $10,000; (d) $5,000.
b. Which of these events will decrease a company's breakeven point? (a) decrease in units sold; (b) increase in direct labor costs; (c) increase in sales price; (d) both (a) and (b).
c. Halloween, Inc. reported the following income statement data for February: Sales
$150,000; Total costs $170,000; Loss ($ 20,000). The firm's contribution margin percentage at its current selling price of $20 is 40%. What is the company's total fixed cost? (a) $20,000; (b) $90,000; (c) $60,000; (d) $80,000.
d. Refer to the information in part (c). What would be the change in income if the company paid $6,000 for a special advertising campaign and increased sales by 1,000 units, at $20 per unit? (a) $2,000 increase; (b) $14,000 increase; (c) $4,000 decrease; (d) $6,000 decrease.
e. A company's selling price is $50; its contribution margin ratio, 32%; its fixed costs, $200,000; and its income, $20,000. What is the company's breakeven point in units? (a) 11,250; (b) 13,750; (c) 12,500; (d) cannot be determined.