Question 1

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What is the break-even point as a percent of capacity?

Accepted Answer

The break-even point in units is found by dividing the total fixed costs by the price per unit minus the variable cost per unit: $75,000 / ($125 - $60) = 1,000 units. To find the break-even point as a percent of capacity, divide the break-even point in units by the total capacity and multiply by 100: (1,000 / 1,500) * 100 = 66.7%. However, none of the options match this calculation, suggesting a mistake in the calculation or interpretation of the options. Re-evaluating with the correct approach: The correct calculation for the break-even point in units is indeed 1,000 units as initially stated. The error was in the interpretation of the provided options rather than the calculation itself. Given the options provided and the correct calculation leading to a 66.7% break-even point, it appears there has been a misunderstanding in the calculation or the options provided do not accurately reflect the correct answer. The correct approach to finding the break-even point as a percent of capacity involves dividing the break-even volume by the total capacity and multiplying by 100 to convert it into a percentage. If the correct break-even volume is 1,000 units and the capacity is 1,500 units, then the correct percentage should indeed be 66.7%, which does not match any of the provided options, indicating a possible error in the question or in the interpretation of the answer choices.

Question 2

A company expects to sell 30,000 hats at $35 each. The estimated variable cost of each hat is $12.50, and the fixed costs are estimated to be $450,000. Calculate the break-even point in units and revenue. Use the graphical approach to CVP analysis to solve.

Accepted Answer

The answer of A company expects to sell 30,000 hats...

Question 3

A small business calculates that its monthly fixed costs are $4,200. If the business calculates it contribution rate to be 0.32, what level of monthly sales must be generated in order to break even?

Accepted Answer

The answer of A small business calculates that its monthly...

Question 4

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. Calculate the unit contribution margin.

Accepted Answer

The unit contribution margin is calculated by subtracting the variable cost per unit from the selling price per unit. Therefore, $29.95 - $11 = $18.95.

Question 5

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1500 units per month, and sell the product for $125 each. What sales would result in a net income of $16,000?

Accepted Answer

The answer of A manufacturing company is considering producing a...

Question 6

Saheed is planning to run a small web hosting business this year for fellow college students. He can rent a web server for $100 per month. He estimates it will cost
$10/month per web page hosted, and he intends to charge a flat rate of $20 to every customer for initial setup fees.
a) What is the contribution rate that Saheed's business is expected to generate?
b) What is Saheed's break-even level of revenue per month?
c) How many web pages per month must Saheed host in order to break even?

Accepted Answer

The answer of Saheed is planning to run a small...

Question 7

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What would unit sales have to be to attain a net income over $12,000?

Accepted Answer

To find the unit sales needed to attain a net income over $12,000, we first calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit: $29.95 - $11 = $18.95. Next, we calculate the total contribution needed to cover the fixed costs and achieve a net income of $12,000: $45,000 (fixed costs) + $12,000 (desired net income) = $57,000. Finally, we divide the total contribution needed by the contribution margin per unit to find the unit sales: $57,000 / $18.95 ≈ 3,008 units.

Question 8

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What is the break-even point in revenue per month?

Accepted Answer

To find the break-even point, we need to know the total cost and the selling price of each toy.

Total cost per toy = variable cost per toy + (total fixed costs / total number of toys produced)

total number of toys produced = total fixed costs / (selling price per toy - variable cost per toy)
 
total number of toys produced = 45000 / (29.95 - 11) = 2365

Break-even point = total number of toys produced x selling price per toy
Break-even point = 2365 x 29.95 = $71,121

Therefore, the best choice is C. $71,121 is the break-even point in revenue per month.

Question 9

M Studios retails their own brand of camera that they manufacture in their plant for $500. The plant capacity is 1,000 units per month and variable costs are $225 per camera. Total fixed costs for the year are $2.16 million. Calculate the break-even point as a percentage of capacity.

Accepted Answer

We can use the break-even point formula to solve this problem:

Break-even point (in units) = Total fixed costs / (Price per unit - Variable cost per unit)

Price per unit = $500
Variable cost per unit = $225

Total fixed costs = $2.16 million = $2,160,000

Break-even point (in units) = $2,160,000 / ($500 - $225) = 8,640 units

Since the plant capacity is 1,000 units per month, the annual capacity is 12,000 units.

Break-even point (as a percentage of capacity) = (8,640 / 12,000) x 100% = 72%

The break-even point is 72% of the plant capacity, which means that M Studios needs to sell at least 72% of their production capacity in order to break even.

Therefore, the best choice is B.

Question 10

Sam manufactures a product that is selling so well, he has decided to expand his operation to 50,000 units per month. The unit cost is $7, estimated fixed costs are $1.8 mil per year and variable costs are $5 per unit. The product currently sells for $20. Use the graphical approach to CVP analysis to solve the following:
a) What is the break-even point as a percent of capacity?
b) What would the net income be at 75% capacity?
c) What would unit sales have to be to attain a net income of $100,000?
d) If sales dropped to 50% of capacity, what would the resulting net income be?

Accepted Answer

The answer of Sam manufactures a product that is selling...

Question 11

Enrique is studying the feasibility of producing a new product. His existing facilities could be expanded to manufacture 2,000 new units per month. The unit cost is $75. Estimated fixed costs are $3.36 mil per year and variable costs are $25 per unit. Competitors sell a similar product for $350 each. Use the graphical approach to CVP analysis to solve the following:
a) What would the net income be at 80% capacity?
b) What would unit sales have to be to attain a net income of $100,000?
c) If sales dropped to 60% of capacity, what would the resulting net income be?

Accepted Answer

The answer of Enrique is studying the feasibility of producing...

Question 12

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What would be the net income at 75% capacity?

Accepted Answer

At 75% capacity, the company will produce and sell 1,125 units (75% of 1,500 units).

Revenue = Selling price * Number of units sold 
Revenue = $125 * 1,125 
Revenue = $140,625

Total variable cost = Variable cost per unit * Number of units sold 
Total variable cost = $60 * 1,125 
Total variable cost = $67,500

Total cost = Total fixed cost + Total variable cost 
Total cost = $75,000 + $67,500 
Total cost = $142,500

Net income = Revenue - Total cost 
Net income = $140,625 - $142,500 
Net income = -$1,875

Therefore, the net income at 75% capacity would be a loss of $1,875. Option D is the correct answer.

Question 13

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What would unit sales have to be to attain a net income over $8,000?

Accepted Answer

The answer of Kuldip's factory manufactures toys that sell for...

Question 14

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What is the break-even point in units per month?

Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point in units = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given values: $45,000 / ($29.95 - $11) = $45,000 / $18.95 ≈ 2,375 units.

Question 15

M Studios retails their own brand of camera that they manufacture in their plant for $500. The plant capacity is 1,000 units per month and variable costs are $225 per camera. Total fixed costs for the year are $2.16 million. How many cameras must be sold per month to have a net income of $40,000?

Accepted Answer

To achieve a net income of $40,000 per month, first calculate the monthly fixed costs by dividing the annual fixed costs by 12: $2,160,000 / 12 = $180,000. The contribution margin per camera is the selling price minus the variable cost: $500 - $225 = $275. To find the break-even point in units, add the desired net income to the monthly fixed costs and divide by the contribution margin per unit: ($180,000 + $40,000) / $275 = 800 cameras.

Question 16

Moens Corp. expects to operate at 90% of capacity next year. Its forecast operating budget is:  a) What is Moen's break-even revenue?
b) What would be Moen Corp.'s net income if it operates at full capacity.

Accepted Answer

The answer of Moens Corp. expects to operate at 90%...

Question 17

Use the graphical approach to CVP analysis to solve the following problem.
Reflex Manufacturing Corp. manufactures borgels at a unit variable cost of $43. It sells them for $70 each. It can produce a maximum of 3,200 borgels per month. Annual fixed costs total $648,000.
a) What is the break-even volume per month?
b) What is the monthly net income at a volume of 2500 borgels per month?
c) What is the monthly net income if Reflex operates at 50% of capacity during a recession?

Accepted Answer

The answer of Use the graphical approach to CVP analysis...

Question 18

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. Calculate the unit contribution margin.

Accepted Answer

The unit contribution margin is calculated as the selling price per unit minus the variable cost per unit. Therefore, it is $125 - $60 = $65.

Question 19

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What would be the net income at 90% capacity?

Accepted Answer