Figure 4-4

question 110

Multiple Choice

Figure 4-4.Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12,000 gyms and 4,000 tree houses.
-Refer to Figure 4-4. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the new contribution margin ratio (rounded to two decimal places) ?

• A) 38%
• B) 62%
• C) 40%
• D) 60%
• E) 50%

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Definitions:

Interest Paid

The amount of interest expense that has been paid by the company during a specific period for borrowed funds.

Capital Lease

A lease agreement in which the lessee essentially acquires all the risks and rewards of ownership, akin to a financial purchase.

Operating Lease

A leasing agreement for the use of an asset, where the lessee does not assume the risk of ownership.

Benefits and Risks

An assessment of the positive outcomes (benefits) and potential negative outcomes (risks) associated with a decision or action.