Question 1

Sandy Incorporated sells two products,larges and smalls.Larges sell for $90 per unit with variable costs of $60 per unit.Smalls sell for $30 per unit with variable costs of $10 per unit.Total fixed costs for the company are $41,600.Sandy Incorporated typically sells three larges for every two smalls.What is the breakeven point in total units?

Accepted Answer

C)
 11ea7fd5_6723_002b_99dd_f11b4a57f838_TB1766_00 Contribution Margin $130 / 5 Sales Mix = $26.00 Weighted CM
Fixed costs $41,600 / 26.00 = 1,600 BE units

Question 2

Jackie's Creamery sells fudge,cookies,and popcorn to patrons in the local community.The manager at the creamery sold 12,000 total boxes of merchandise last year.The popcorn outsold fudge by a margin of 2 to 1.The sales of caramels equaled the sales of popcorn.Total fixed costs for Jackie's Creamery total $14,000.The managerial accountant at Jackie's Creamery reported the following information:

Which formula should the managerial accountant use to determine the number of boxes of each different snack sold?

Accepted Answer

The answer of Jackie's Creamery sells fudge,cookies,and popcorn to patrons...

Question 3

Gabe Industries sells two products,Basic models and Deluxe models.Basic models sell for $42 per unit with variable costs of $30 per unit.Deluxe models sell for $50 per unit with variable costs of $40 per unit.Total fixed costs for the company are $75,400.Gabe Industries typically sells four Basic models for every Deluxe model.What is the breakeven point in total units?

Accepted Answer

A)
Basic Deluxe Total
Sales $42 $50
Variable Costs 30 40
Contribution Margin 12 10
× Sales Mix 4 1 5
Contribution margin $48 $10 $58
Contribution Margin $58 / 5 Sales Mix = $11.60 Weighted CM
Fixed costs $75,400 / 11.60 = 6,500 BE units

Question 4

Sally's Fries sells three large fries for every two small ones.A small fry sells for $2 with a variable cost of $1.A large fry sells for $3 with a variable cost of $1.25.What is the weighted average contribution margin?

Accepted Answer

D)
 11ea7fd5_6722_d91a_99dd_61d6bf2c1182_TB1766_00 Contribution Margin $7.25 / 5 Sales Mix = $1.45 Weighted CM

Question 5

Slamburger's sells three cheeseburgers for every two regular hamburgers.A cheeseburger sells for $3.50 with a variable cost of $1.00.A regular hamburger sells for $3 with a variable cost of $0.75.What is the weighted average contribution margin?

Accepted Answer

B)
 11ea7fd5_6723_c37e_99dd_875aa1e9f748_TB1766_00 Contribution Margin $12.00 / 5 Sales Mix = $2.40 Weighted CM

Question 6

Contribution margin less fixed costs yields

Accepted Answer

Contribution margin is calculated by subtracting variable costs from revenue, and represents the amount of revenue that is available to cover fixed costs and generate operating income. Therefore, subtracting fixed costs from contribution margin yields operating income.

Question 7

All else being equal,a company earns more income by selling high-contribution margin products than by selling an equal number of low-contribution margin products.

Accepted Answer

Contribution margin is the amount by which sales revenue exceeds variable costs. Therefore, selling high-contribution margin products will result in more income for the company compared to selling an equal number of low-contribution margin products, all else being equal.

Question 8

Wallace Industrial sells two products,large forklifts and small forklifts.A large forklift sells for $50,000 per unit with variable costs of $26,000 per unit.Small forklifts sell for $30,000 per unit with variable costs of $12,000 per unit.Total fixed costs for the company are $1,600,000.Wallace Industrial typically sells one large forklifts for every two smalls.What is the breakeven point in total units?

Accepted Answer

A)
 11ea7fd5_6724_119f_99dd_b50a7f8542d4_TB1766_00 Contribution Margin $60,000 / 3 Sales Mix = $20,000 Weighted CM
Fixed costs $1,600,000 / 20,000 = 80 BE units

Question 9

The weighted average contribution margin will always be the same as the contribution margin of the highest-volume product.

Accepted Answer

The weighted average contribution margin is determined by calculating the total contribution margin of all products and dividing by the total number of units sold of all products. This means that it takes into account the contribution margins of all products, not just the highest-volume product. Therefore, it is not necessarily the same as the contribution margin of the highest-volume product.

Question 10

If a company sells 13 of Product A for every 3 of Product B that it sells,the sales mix can be stated as

Accepted Answer

Both "13:3" and "13/16 A and 3/16 B" are correct ways to express the sales mix. "13:3" represents the ratio of Product A sales to Product B sales, while "13/16 A and 3/16 B" represents the fractional representation of the sales mix, where out of every 16 products sold, 13 are Product A and 3 are Product B.

Question 11

Fixed costs divided by weighted average contribution margin per unit equals

Accepted Answer

Breakeven sales in units are calculated by dividing the total fixed costs by the contribution margin per unit. This gives the number of units that must be sold to cover all fixed costs, resulting in a net income of zero.

Question 12

To find the weighted average contribution margin,a company adds up the individual unit contribution margins of the different products and then divides by the number of different products.

Accepted Answer

To find the weighted average contribution margin, a company adds up the product of each product's unit contribution margin and its relative sales mix, and then divides by the total sales mix. This takes into account the fact that some products may sell more than others, and therefore have a greater impact on the company's overall contribution margin. Simply dividing by the number of different products would not give an accurate representation of the weighted average contribution margin.

Question 13

If a company sells 15 of Product A for every 2 of Product B that it sells,the sales mix can be stated as

Accepted Answer

The sales mix can be expressed as a ratio (15:2) and as a fraction of total sales (15/17 for A and 2/17 for B).

Question 14

The same CVP formulas that are used to perform CVP analysis for a company with a single product can be used for any company that sells more than one product,as long as a company uses the weighted average contribution margin of all products,rather than the contribution margin of a sole product.

Accepted Answer

The statement is correct. The CVP formulas can be used for companies with multiple products as long as the weighted average contribution margin is used.

Question 15

Mayfield Company sells two products,Blue models and Plaid models.Blue models sell for $45 per unit with variable costs of $30 per unit.Plaid models sell for $50 per unit with variable costs of $25 per unit.Total fixed costs for the company are $19,950.Mayfield Company typically sells two Blue models for every three Plaid models.What is the breakeven point in total units?

Accepted Answer

C)
 11ea7fd5_6722_15c7_99dd_cf9fe4b4a91c_TB1766_00 Contribution Margin $105 / 5 Sales Mix = $21 Weighted CM
Fixed costs $19,950 / 21 = 950 BE units

Question 16

The Winner's Circle sells two products,medals and trophies.The Winner's Circle predicts that it will sell 25,000 medals and 5,000 trophies in the next period.The unit contribution margins for medals and trophies are $6.00 and $15.00,respectively.What is the weighted average unit contribution margin?

Accepted Answer

C)
 11ea7fd5_6723_755d_99dd_973189ff7b80_TB1766_00 Contribution Margin $225,000 / 30,000 Sales Mix = $7.50 Weighted CM

Question 17

Barkley Company sells two products,red cups and black mugs.Barkley predicts that it will sell 2,500 red cups and 1,000 black mugs in the next period.The unit contribution margins for red cups and black mugs are $2.80 and $3.50,respectively.What is the weighted average unit contribution margin?

Accepted Answer

C)
 11ea7fd5_6722_63e8_99dd_fd1ad6e456d1_TB1766_00 Contribution Margin $10,500 / 3,500 Sales Mix = $3.00 Weighted CM

Question 18

When a company sells more than one product,it does not have a unique breakeven point.

Accepted Answer

The answer of When a company sells more than one...

Question 19

Bravo Company sells two products,green camouflage pants and orange camouflage pants.Bravo predicts that it will sell 1,000 pairs of green pants and 1,500 pairs of orange pants in the next period.The unit contribution margins for green pants and orange pants are $8.00 and $7.50,respectively.What is the weighted average unit contribution margin?

Accepted Answer

B)
 11ea7fd5_6723_4e4c_99dd_67e66bd8a068_TB1766_00 Contribution Margin $19,250 / 2,500 Sales Mix = $7.70 Weighted CM

Question 20

Madden Enterprises sells two products,Silver models and Gold models.Madden Enterprises predicts that it will sell 6,000 Silver models and 4,000 Gold models in the next period.The unit contribution margins for Silver models and Gold models are $75 and $150,respectively.What is the weighted average unit contribution margin?

Accepted Answer

C)
 11ea7fd5_6722_8af9_99dd_99366c16e615_TB1766_00 Contribution Margin $1,050,000 / 10,000 Sales Mix = $105.00 Weighted CM

Quiz 7: Cost-Volume-Profit Analysis