Question

1) Zehms,Inc. has a contribution margin per unit of $21 and a contributionmargin ratio of 60%. How much is the selling price of eachunit?

A) Cannot be determinedwithout more information

B) $35

C) $52.50

D) $12.60

2)Which ofthe following statements is nottrue?

A.When acompany's sales revenue is increasing, high operating leverage isgood because it means that profits will increaserapidly.

B.When acompany's sales revenue is decreasing, high operating leverage isgood because it means that profits will decrease at a slower pacethan revenues decrease.

C.Operatingleverage refers to the extent to which a company's net incomereacts to a given change in sales.

D. Companies that have higher fixed costs relative to variablecosts have higher operating leverage.

3. WarnerManufacturing reported sales of $2,000,000 last year (100,000 unitsat $20 each), when the break-even point was 75,000 units. Warner'smargin of safety ratio is

A.33%. B.25%.C.75%. D.125%

4. In2012, Raleigh sold 1,000 units at $500 each, and earned net incomeof $50,000. Variable expenses were $300 per unit, and fixedexpenses were $150,000. The same selling price is expected for2013. Raleigh's variable cost per unit will rise by 10% in 2013 dueto increasing material costs, so they are tentatively planning tocut fixed costs by $15,000. How many units must Raleigh sell in2013 to maintain the same income level as 2012?

A.1,088

B.794

C.971

D.1,176