XYZ manufacturing produces a single product that sells for $200. Variable costs per unit equal $50. The company expects total fixed costs to
be $120000 for the next month at the projected sales level of 2000 units.

In an attempt to improve performance XYZ manufacturing is considering a 20% reduction in the selling price which will result in a 20%
increase in sales. If this proposed reduction in selling price (and increase in sales) is implemented

a) Operating income will decrease by $36000

b) Operating income will increase by $36000

c) Operating income will decrease by $80000

d) Operating income will increase by $80000

24) The margin of safety is a key concept of CVP analysis. The margin of safety is the

a) difference between breakeven sales and current sales divided by breakeven sales.

b) difference between breakeven contribution margin and current contribution margin divided by breakeven contribution margin.

c) difference between current contribution margin and break-even contribution margin divided by current contribution margin.

d) difference between current sales and break-even sales divided by current sales.

Operating leverage measures:

a) how senstitive profit is to a change in fixed costs.

b) how sensititive profit is to a change in sales volume.

c) how sensititive profit is to a change in sales price per unit.

D) how sensitive profit is to a change in tax rates.

Cost structure refers to the relative proportion of:

a) Variable costs to contribution margin

b) Total costs to sales.

Cost structure refers to the relative proportion of: Cost structure refers to the relative proportion of:.

d) Sales price per unit to variable costs per unit.

Dc electronics uses a standard part in the manufacture of several of its radios. The cost of producing 30000 parts is $90000 which includes
fixed costs of $33000 and variable costs of $57000. The company can buy the part from an outside supplier for $2.50 per unit and avoid 30% of the fixed
costs.

If Dc electronics makes the part how much will its operating income be?

a) $4800 greater than if company bought the part

b) $8100 greater than if the company bought the part

c) $5100 less than if the company bought the part.

d) $15000 less than if the company bought the part.