Question 1

Assume the following cost information for Marie Company: $\begin{array}{lr}
\text { Selling price per unit } & \$ 144 \
\text { Variable costs per unit } & \$ 80 \
\text { Total fixed costs } & \$ 80,000 \
\text { Tax rate } & 40 \%
\end{array}$ _____ of sales dollars is required to earn an after?tax net income of $24,000.

Accepted Answer

To find the sales dollars required to earn an after-tax net income of $24,000, first calculate the pre-tax income needed, since the after-tax income is $24,000 and the tax rate is 40%. The formula for this is: Pre-tax income = After-tax income / (1 - Tax rate) = $24,000 / (1 - 0.4) = $24,000 / 0.6 = $40,000. Next, calculate the total required sales to achieve this pre-tax income, considering the fixed costs and the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable costs per unit, which is $144 - $80 = $64. The formula to calculate the required sales is: Required sales = (Total fixed costs + Desired profit before taxes) / Contribution margin per unit = ($80,000 + $40,000) / ($64 / $144) = $120,000 / ($64 / $144). To find the required sales in dollars, multiply the required units by the selling price per unit: Required sales dollars = Required units * Selling price per unit. Since the contribution margin ratio (CM ratio) is the contribution margin per unit divided by the selling price per unit, CM ratio = $64 / $144. Therefore, Required sales dollars = $120,000 / (CM ratio) = $120,000 / ($64 / $144) = $270,000.

Question 2

Strongsville Company wishes to earn after-tax net income of $18,000.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Strongsville's tax rate is 40%.The number of units that must be sold to earn the targeted net income is _____.

Accepted Answer

To achieve an after-tax net income of $18,000 with a tax rate of 40%, the before-tax income needed is $18,000 / (1 - 0.40) = $30,000. Adding the fixed costs of $84,000, the total required contribution is $114,000. Dividing this by the contribution margin per unit of $6.00 gives the number of units needed to be sold: $114,000 / $6.00 = 19,000 units.

Question 3

The following information is for Kinsner Corporation: $\begin{array}{lr}
\text { Total fixed costs } & \$ 313,500 \
\text { Variable costs per unit } & \$ 99 \
\text { Selling price per unit } & \$ 154
\end{array}$ If management has a targeted net income of $46,200 ignore income taxes), then the number of units that must be sold is _____.

Accepted Answer

To find the number of units needed to achieve the targeted net income, use the formula: $(\text{Total Fixed Costs} + \text{Target Net Income}) / (\text{Selling Price per Unit} - \text{Variable Cost per Unit})$. Plugging in the values: $(313,500 + 46,200) / (154 - 99) = 6,540$ units.

Question 4

Hot Company, a producer of salsa, has the following information: $$\begin{array} { l r } 
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 8.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The contribution margin per unit is _____.

Accepted Answer

The contribution margin per unit is calculated as the selling price per unit minus the variable cost per unit, which is $8.00 - $3.00 = $5.00.

Question 5

Zachary Company wishes to earn after-tax net income of $18,000.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Zachary's tax rate is 40%.The number of units that must be sold to breakeven is _____.

Accepted Answer

Breakeven sales in units = Fixed costs / Contribution margin per unit= $84,000 / $6.00= 14,000 units

Question 6

The following information is for Brook Park Corporation: $\begin{array}{lr}
\text { Total fixed costs } & \$ 313,500 \
\text { Variable costs per unit } & \$ 101 \
\text { Selling price per unit } & \$ 163
\end{array}$ The contribution-margin ratio is _____.

Accepted Answer

The answer of The following information is for Brook Park...

Question 7

Assume the following cost information for Andrew Company: $\begin{array}{lr}
\text { Selling price per unit } & \$ 144 \
\text { Variable costs per unit } & \$ 80 \
\text { Total fixed costs } & \$ 80,000 \
\text { Tax rate } & 40 \%
\end{array}$ _____ must be sold to earn an after-tax net income of $40,800.

Accepted Answer

To find the number of units needed to be sold to earn an after-tax net income of $40,800, we first need to calculate the target pre-tax income, since the net income given is after-tax. The formula to calculate the target pre-tax income is: $$ \text{Target Pre-Tax Income} = \frac{\text{Target Net Income}}{1 - \text{Tax Rate}} $$ Given that the target net income is $40,800 and the tax rate is 40%, the target pre-tax income is: $$ \text{Target Pre-Tax Income} = \frac{40,800}{1 - 0.4} = \frac{40,800}{0.6} = 68,000 $$ Next, to find the number of units needed to be sold to achieve this pre-tax income, we use the formula: $$ \text{Units} = \frac{\text{Total Fixed Costs} + \text{Target Pre-Tax Income}}{\text{Selling Price per Unit} - \text{Variable Costs per Unit}} $$ Plugging in the given values: $$ \text{Units} = \frac{80,000 + 68,000}{144 - 80} = \frac{148,000}{64} = 2,312.5 $$ Since we cannot sell half a unit, we round up to the next whole unit, resulting in 2,313 units needed to be sold to achieve the target after-tax net income of $40,800.

Question 8

_____ is not an underlying assumption of the cost?volume-profit graph.

Accepted Answer

The cost-volume-profit (CVP) analysis assumes that revenues and expenses are linear over the relevant range, meaning they change at a constant rate with changes in volume. Option C, which states that revenues and expenses are nonlinear, contradicts this fundamental assumption.

Question 9

Hug Me Company produces dolls.Each doll sells for $20.00.Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor.If the break-even volume in dollars is $1,446,000, then the total fixed costs for the period must be _____.

Accepted Answer

Break-even volume in dollars = Total fixed costs / (Selling price per unit - Variable cost per unit)$1,446,000 = Total fixed costs / ($20.00 - $14.00)$1,446,000 = Total fixed costs / $6.00Total fixed costs = $1,446,000 x $6.00Total fixed costs = $8,676,000

Question 10

Sizzling Company, a producer of salsa, has the following information: $$\begin{array} { l r } 
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 5.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The break-even point in dollars is _____.

Accepted Answer

Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)= 90,000 / (5.00 - 3.00)= 90,000 / 2.00= $225,000

Question 11

Hug Me Company produces dolls.Each doll sells for $20.00.Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor.If total fixed costs are $435,000, then the break?even volume in dollars is _____.

Accepted Answer

Break-even volume in dollars = Fixed costs / (Selling price per unit - Variable cost per unit)= 435,000 / (20 - 14)= 435,000 / 6= $1,450,000

Question 12

The horizontal axis on the cost-volume?profit graph is the _____.

Accepted Answer

The horizontal axis on the cost-volume-profit graph represents sales volume in units. This is because the graph is used to analyze the relationship between sales volume and profitability, and therefore it is necessary to measure sales volume on the horizontal axis. The other options (dollars of cost, dollars of revenue, net income) are all important factors in analyzing a company's profitability, but they are usually represented on the vertical axis or as a line on the graph.

Question 13

The following information is for Kinsner Corporation: $\begin{array}{lr}
\text { Total fixed costs } & \$ 313,500 \
\text { Variable costs per unit } & \$ 99 \
\text { Selling price per unit } & \$ 154
\end{array}$ If management has a targeted net income of $59,400 ignore income taxes), then sales revenue should be _____.

Accepted Answer

To find the sales revenue needed to achieve the targeted net income, we first calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit: $154 - $99 = $55. Then, we calculate the total contribution margin needed to cover fixed costs and achieve the targeted net income: $313,500 (fixed costs) + $59,400 (targeted net income) = $372,900. To find the required sales revenue, we divide the total contribution margin needed by the contribution margin per unit and multiply by the selling price per unit: ($372,900 / $55) * $154 = $1,044,120.

Question 14

_____ is not shown in the cost-volume-profit graph.

Accepted Answer

The fixed cost per unit is not shown in the cost-volume-profit graph. The graph represents the relationship between sales volume, revenue, variable costs, and total costs. The break-even point, profit or loss at any rate of activity, and sales volume in units are all shown in the graph.

Question 15

On Fire Company, a producer of salsa, has the following information: $$\begin{array} { l r } 
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 5.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The contribution-margin ratio is _____.

Accepted Answer

The contribution-margin ratio is calculated as (Selling Price per Unit - Variable Cost per Unit) / Selling Price per Unit. Here, it is ($5.00 - $3.00) / $5.00 = 0.40 or 40%.

Question 16

The following information is for Donald Corporation: $\begin{array}{lr}
\text { Total fixed costs } & \$ 333,500 \
\text { Variable costs per unit } & \$ 99 \
\text { Selling price per unit } & \$ 154
\end{array}$ If total fixed costs increased to $394,850, then break-even volume in dollars would increase by _____.

Accepted Answer

The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit (selling price per unit minus variable cost per unit). Initially, the break-even point is $333,500 / ($154 - $99). After the increase in fixed costs, it becomes $394,850 / ($154 - $99). The percentage increase in break-even volume in dollars is calculated by comparing these two values, resulting in an 18.4% increase.

Question 17

Berea Company currently sells 19,000 units.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Berea's tax rate is 40%.The margin of safety in units is _____.

Accepted Answer

The margin of safety in units is calculated as the difference between actual sales and break-even sales. Break-even sales in units = Total fixed costs / Contribution margin per unit = $84,000 / $6 = 14,000 units. Margin of safety = Actual sales - Break-even sales = 19,000 - 14,000 = 5,000 units.

Question 18

_____ will decrease a company's break-even point.

Accepted Answer

By reducing the company's total fixed costs, the break-even point will decrease as the company will have less expenses to cover before earning a profit.

Question 19

If fixed expenses were the same and contribution margin per unit was cut in half, then the break?even point would _____.

Accepted Answer

If contribution margin per unit is cut in half, it means that the profit per unit is reduced, hence more units need to be sold to cover fixed expenses. Therefore, the break-even point would double.

Question 20

Hug Me Company produces dolls.Each doll sells for $20.00.Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor.If total fixed costs are $435,000, then the break?even point is _____.

Accepted Answer

The answer of Hug Me Company produces dolls.Each doll sells...

Quiz 2: Introduction to Cost Behavior and Cost-Volume Relationships