Question
Identify the letter of the choice that best completes the statement or answers the question. If variable costs per unit decrease, sales volume at the
Identify the letter of the choice that best completes the statement or answers the question.
- If variable costs per unit decrease, sales volume at the break-even point will
a. | increase |
b. | decrease |
c. | remain the same |
d. | remain the same; however, contribution margin per unit will decrease |
- If fixed costs increase, the break-even point in units will
a. | increase |
b. | decrease |
c. | remain the same |
d. | remain the same; however, contribution margin per unit will decrease |
- If the selling price per unit increases, the break-even point in units will
a. | increase |
b. | decrease |
c. | remain the same |
d. | remain the same; however, contribution margin per unit will decrease |
- If the contribution margin per unit decreases, the break-even point in units
a. | will increase |
b. | will decrease |
c. | will remain the same |
d. | cannot be determined from the information given |
Structured Questions
Single Product
- Enola, Inc., manufactures a product that sells for $400. The variable costs per unit are as follows:
Direct materials | $100 |
Direct labor | 80 |
Variable manufacturing overhead | 50 |
During the year, the budgeted fixed manufacturing overhead is estimated to be $500,000, and budgeted fixed selling and administrative costs are expected to be $250,000.Variable selling costs are $20 per unit.
Required:
a. | Determine the break-even point in units. |
b. | Determine the number of units that must be sold to earn $300,000 in profit before taxes. |
c. | Determine the number of units that must be sold to generate an after-tax profit of $90,000 if there is a 40 percent tax rate. |
- LaVerle, Inc., manufactures a product that sells for $480. The variable costs per unit are as follows:
Direct materials | $160 |
Direct labor | 100 |
Variable manufacturing overhead | 40 |
During the year, the budgeted fixed manufacturing overhead is estimated to be $100,000, and budgeted fixed selling and administrative costs are expected to be $40,000.Variable selling costs are $20 per unit.
Required:
a. | Determine the break-even point in units. |
b. | Determine the number of units that must be sold to earn $60,000 in profit before taxes. |
c. | Determine the number of units that must be sold to generate an after-tax profit of $60,000 if there is a 40 percent tax rate |
- Determine the following missing amounts:
Sales | $100,000 |
Total variable costs | ? |
Contribution margin | ? |
Total fixed costs | $20,000 |
Net income | $12,000 |
Units sold | 100 |
Price | ? |
Variable cost per unit | ? |
Contribution margin per unit | ? |
Contribution margin ratio | ? |
Break-even point in units | ? |
- The break-even point in units is 2,000 for Lumus Company. Contribution margin per unit was $20 per unit. What would total sales units if Lumus Company desires a net income of $45,000?
- Danna Company has a margin safety of $20,000. The break-even point is $220,000, and the variable cost ratio is 25 percent. Given this information, what would be the net income?
- The following information pertains to Kangas Company:
Selling price per unit | $250 |
Variable manufacturing costs per unit | $75 |
Fixed manufacturing costs per unit | $90 |
Variable selling costs per unit | $45 |
Fixed selling costs per unit | $20 |
Expected production and sales | 2,000 units |
By how many units can Kangas Company's sales decline before losses are incurred?
Multi-Product
- Information about two products is as follows:
Product C | Product D | |
Selling price per unit | $20 | $25 |
Variable costs per unit | 11 | 18 |
Contribution margin per unit | $ 9 | $ 7 |
The firm expects 60 percent of its sales (in units) to be Product C (a sales mix of 6:4). Fixed costs are expected to be $82,000.
What is the Break-even in units?
- Information about two products is as follows:
Product E | Product Z | |
Selling price per unit | $40 | $65 |
Variable costs per unit | 15 | 45 |
Contribution margin per unit | $25 | $20 |
The firm expects 80 percent of its sales (in units) to be Product E (a sales mix of 8:2). Fixed costs are expected to be $90,000.
Required
- Calculate the Break-even in units.
- Calculate the number of units of Product E to be sold if the company is targeting a before-tax income of $120,000.
- Lily Fan Company has three products: Economy, Standard, and Deluxe. The following information is available for the three products:
Economy | Standard | Deluxe | |
Selling price | $10 | $20 | $35 |
Variable cost | $8 | $13 | $24 |
Contribution margin | $2 | $7 | $11 |
Expected sales | 18,000 | 12,000 | 6,000 |
Fixed costs are $170,500.
Required
- calculate the break-even sales in dollars for Economy.
- Calculate the number of units to be sold to achieve a target net income before tax for the coming year of $62,000.
- Calculate Lily Fan Company's margin of safety.
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