1. Serfass Corporation\'s contribution format income statement for July appears

Question

1.

Serfass Corporation's contribution format income statement for July appears below:

The degree of operating leverage is closest to:

Multiple Choice

0.28

0.55

2.00

1.82

2.

Majid Corporation sells a product for $135 per unit. The product's current sales are 41,100 units and its break-even sales are 32,115 units.

What is the margin of safety in dollars?

Multiple Choice

$3,387,722

$5,548,500

$4,335,525

$1,212,975

3.

Compute the amount of raw materials used during November if $39,000 of raw materials were purchased during the month and if the inventories were as follows:

Multiple Choice

$40,500

$40,300

$37,800

$43,800

Sales $ 371,200 Variable expenses 185,600 Contribution margin 185,600 Fixed expenses 83,520 Net operating income $ 102,080

Explanation / Answer

1) Degree of operating leverage = Contribution margin/Income from operation

                                                    = 185600/102080

Degree of operating leverage =1.82

so answer is d) 1.82

2) Margin of safety sales = (41100-32115)*135 =1212975

so answer is d) $1212975

3) Raw material used = 10600+39000-5800 = 43800

so answer is d) $43,800

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