Question

a) A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be

		$10,000 more if Product A is made.
		$10,000 less if Product B is made.
		$10,000 less if Product A is made.
		the same if either product is made.

b)Howard Company sells a mixture of Product A, Product B, and Product C. It sells 1,000 units of Product A, 2,000 units of Product B, and 3,000 units of Product C. What is Howard’s sales mix?

		33.3% Product A, 16.67% Product B, and 50% Product C.
		16.67% Product A, 33.33% Product B, and 50% Product C
		33.33% Product A, 33.33% Product B, and 33.3% Product C
		16.67% Product A, 50% Product B, and 33.3% Product C

c) If variable costs per unit decreased because of a decrease in utility rates, the break-even point would

		decrease
		increase
		remain the same
		increase or decrease, depending upon the percentage increase in utility rates

d) What does it mean when a company has an operating leverage of 5?

		1% change in sales and contribution margin will result in a 5% change in Net Income.
		5% change in sales and contribution margin will result in a 1% change in Net Income.
		The company is low risk because the company has a low proportion of fixed costs.
		None of the above.

Answer 1