Question 1

All other things held constant,how will an increase in selling price affect the break-even point measured in units?

Accepted Answer

The break-even point in units decreases when the selling price per unit increases, assuming costs remain constant. This is because each unit sold contributes more towards covering fixed costs, thus requiring fewer units to be sold to break even.

Question 2

[The following information applies to the questions displayed below.]
The following data are available for product no.CK74,manufactured and sold by Ruby Corporation:
 
-The contribution margin per unit for product no.CK74 is:

Accepted Answer

The contribution margin per unit for product no.CK74 is $80.19, which means that for each unit sold, $80.19 is available to cover fixed costs and contribute towards profit. This information is not enough to determine the best choice without additional context or criteria.

Question 3

In order to calculate break-even sales units,fixed costs are divided by the:

Accepted Answer

Break-even sales units can be calculated by dividing fixed costs by the contribution margin per unit. This is because once the contribution margin per unit covers the fixed costs, any additional units sold will result in profit.

Question 4

How many units must be sold each month to earn a monthly operating income of $8,000? (Round your final answer up to the nearest whole number. )

Accepted Answer

To determine the number of units that must be sold each month to earn a monthly operating income of $8,000, you would need to use the contribution margin ratio. If the contribution margin per unit is $8 and the fixed costs are $4,000, then the contribution margin ratio is 0.5 (8/16). To find the break-even point in units, you would divide the fixed costs by the contribution margin ratio (4,000/0.5 = 8,000). Therefore, 8,000 units must be sold at the current price to break even. To earn a monthly operating income of $8,000, the total profit target would be $12,000 (8,000 break-even point + 8,000 target profit). To find the number of units needed to achieve this target profit, you would divide the total profit target by the contribution margin per unit (12,000/8 = 1,500 units). However, this is the number of units needed to achieve the target profit, so the actual number of units that must be sold each month to earn a monthly operating income of $8,000 would be slightly higher. Round up to the nearest whole number, and you get B) 1,442 units.

Question 5

If unit sales prices are $7 and variable costs are $5 per unit,how many units would have to be sold to break-even if fixed costs equal $8,000?

Accepted Answer

To find out the breakeven point, we need to use the following formula:
Breakeven point = Fixed Costs / (Unit Price - Variable Costs)

Substituting the given values, we get:
Breakeven point= 8000 / (7-5)
Breakeven point= 4000 units.

Therefore, the answer is C) 4,000 units.

Question 6

If the unit sales price is $7 and variable costs are $3,how many units have to be sold to earn a profit of $3,600 if fixed costs equal $5,000?

Accepted Answer

The answer of If the unit sales price is $7...

Question 7

The contribution margin ratio is computed as:

Accepted Answer

The contribution margin ratio is computed by dividing the contribution margin (sales minus variable costs) by sales. This ratio represents the portion of sales revenue that is available to cover fixed costs and contribute to profits. Option A is the correct choice because it includes the correct formula for calculating the contribution margin ratio.

Question 8

[The following information applies to the questions displayed below.]
Mitchell Corporation manufactures a single product.The selling price is $85 per unit,and variable costs amount to $68 per unit.The fixed costs are $16,500 per month.
-What is the contribution margin ratio of Mitchell 's product?

Accepted Answer

The contribution margin per unit is the selling price minus the variable cost, which is $85 - $68 = $17. The contribution margin ratio is the contribution margin per unit divided by the selling price, which is $17 / $85 = 0.20 or 20%.

Question 9

The dollar sales volume necessary to produce operating income of $245,000 is closest to: (Round the answer to the nearest whole number. )

Accepted Answer

The answer of The dollar sales volume necessary to produce...

Question 10

What will be Mitchell's monthly operating income if 1,800 units are sold each month?

Accepted Answer

The answer of What will be Mitchell's monthly operating income...

Question 11

Millar Company produces a single product that it sells for $89 a unit.If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit,which of the below is correct?

Accepted Answer

The contribution margin per unit can be calculated as follows:

$89 (selling price) - $57 (variable cost) = $32

Therefore, the contribution margin per unit of product is $32. None of the other choices are correct. Fixed costs are not expressed on a per unit basis (A). To break even, the company would need to sell enough units to cover both its fixed and variable costs, not just its fixed costs (B). An increase in sales volume above $68,400 a month would not cause an increase in fixed costs because fixed costs are fixed and do not change with changes in production or sales (C).

Question 12

What will be the monthly margin of safety (in dollars)if 1,800 units are sold each month?

Accepted Answer

The answer of What will be the monthly margin of...

Question 13

[The following information applies to the questions displayed below.]
The following data are available for product no.CK74,manufactured and sold by Ruby Corporation:
 
-The number of units of CK74 that Ruby must sell to break- even is:

Accepted Answer

The answer of [The following information applies to the questions...

Question 14

If the unit sales price is $14,variable costs are $7 per unit and fixed costs are $42,000,how many units must be sold to earn an income of $250,000? (Round the answer up to the next whole number. )

Accepted Answer

The answer of If the unit sales price is $14,variable...

Question 15

If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900,the contribution margin ratio is closest to:

Accepted Answer

Contribution Margin Ratio = (Revenue - Variable Costs) / Revenue

To find the contribution margin ratio, we need to determine the variable costs. We can use the formula:

Break-even point = Fixed costs / Contribution margin ratio

190,000 = 55,900 / Contribution margin ratio

Contribution margin ratio = 55,900 / 190,000

Contribution margin ratio = 0.2942

Contribution margin ratio = 29% (rounded to the nearest whole number)

Therefore, the closest answer is A) 29%.

Question 16

In comparison to selling a product with a low contribution margin ratio,selling a product with a high contribution margin ratio always:

Accepted Answer

A high contribution margin ratio means that a larger portion of each sales dollar contributes to covering fixed costs, thus requiring less sales volume to break even.

Question 17

If the unit sales price is $12,variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit?

Accepted Answer

Contribution margin per unit = Unit sales price - Variable costs 
Contribution margin per unit = $12 - $6 = $6 
Contribution margin ratio per unit = (Contribution margin per unit / Unit sales price) x 100% 
Contribution margin ratio per unit = ($6 / $12) x 100% = 50%

Question 18

[The following information applies to the questions displayed below.]
Mitchell Corporation manufactures a single product.The selling price is $85 per unit,and variable costs amount to $68 per unit.The fixed costs are $16,500 per month.
-What is the monthly sales volume in dollars necessary to break-even?

Accepted Answer

To calculate the break-even point in dollars, you use the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given numbers: $16,500 / ($85 - $68) = $16,500 / $17 = 970.59 units. To find the break-even sales volume in dollars, multiply the number of units by the selling price per unit: 970.59 units * $85 = $82,500.

Question 19

A company's most profitable products are often those which:

Accepted Answer

Products with high contribution margin ratios ($ contribution per unit of sales) generate more profit for each unit sold. However, without high sales volumes, the total profit may still be low. Therefore, the most profitable products are those with both high contribution margin ratios and high sales volumes.

Question 20

If the unit sales price is $12,variable costs are $6 per unit,and fixed costs are $36,000,what sales volume (in dollars)is necessary to break-even?

Accepted Answer

The answer of If the unit sales price is $12,variable...

Quiz 20: Cost-Volume-Profit Analysis