Question 1

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Reliable Furniture manufactures recliners selling for $500 each. Variable costs per unit are $175 for direct material, $125 for direct labor, $35 for variable production overhead, and $15 for variable selling and administrative costs. Annual fixed costs are $200,000 for production overhead and $100,000 for selling and administrative costs. The company applies fixed production overhead to recliners based on a capacity of 20,000 units per year.
-If the company wants to earn a before-tax profit of $600,000, how many recliners must be sold?

Accepted Answer

To find the number of recliners needed to achieve a $600,000 profit, calculate the contribution margin per unit and use the formula: (Fixed Costs + Desired Profit) / Contribution Margin per Unit. Contribution Margin per Unit = Selling Price - Variable Costs = $500 - ($175 + $125 + $35 + $15) = $150. Total Fixed Costs = $200,000 + $100,000 = $300,000. Required Units = ($300,000 + $600,000) / $150 = 6,000 units.

Question 2

Use the following information to answer questions 
Reliable Furniture manufactures recliners selling for $500 each. Variable costs per unit are $175 for direct material, $125 for direct labor, $35 for variable production overhead, and $15 for variable selling and administrative costs. Annual fixed costs are $200,000 for production overhead and $100,000 for selling and administrative costs. The company applies fixed production overhead to recliners based on a capacity of 20,000 units per year.
-The company wants to earn an after-tax profit of $315,000. Reliable's tax rate is 40%. How many recliners must be sold to accomplish management's objective?

Accepted Answer

The answer of Use the following information to answer questions...

Question 3

Calgary Corp. desires a pre-tax income of $700,000. Anticipated sales are 5,000 units; variable costs per unit are $25; and fixed costs are $600,000. How much should the selling price per unit be to achieve the desired income?

Accepted Answer

The answer of Calgary Corp. desires a pre-tax income of...

Question 4

Chelsea Co. projects the following cost information for the upcoming year:

Chelsea Co.'s tax rate is 35%. If Chelsea Co. wants to earn $260,000 in after-tax profits and each product unit sells for $75, how many units of product must be sold?

Accepted Answer

The answer of Chelsea Co. projects the following cost information...

Question 5

A company could determine the effect that a 10% variable cost increase would have on total production costs by using

Accepted Answer

The answer of A company could determine the effect that...

Question 6

Andersen Electronics manufactures a product that sells for $100 per unit. Variable cost per unit is $60 and fixed costs per period are $120,000. If Andersen decreases variable costs by 5%, the company's break-even point in units would

Accepted Answer

The original variable cost is $60, and a 5% decrease makes it $57. The contribution margin per unit increases from $40 to $43. The break-even point is fixed costs divided by the contribution margin per unit. The original break-even point is 3,000 units ($120,000 / $40), and the new break-even point is approximately 2,791 units ($120,000 / $43). The decrease is 209 units (3,000 - 2,791).

Question 7

The selling price of one unit of a product made by Ellis Corp. is $4.50. Variable cost per unit is $1.50. Fixed costs per period are $150,000. Ellis' variable costs increase by 20% and fixed costs decrease by 5%. These changes will cause the company BEP to

Accepted Answer

The original contribution margin per unit is $3.00 ($4.50 - $1.50). After a 20% increase, the variable cost per unit becomes $1.80, reducing the contribution margin per unit to $2.70 ($4.50 - $1.80). The original fixed costs are $150,000, and after a 5% decrease, they become $142,500. The original break-even point in units is $150,000 / $3.00 = 50,000 units. The new break-even point is $142,500 / $2.70 = 52,778 units. The increase in the break-even point is 2,778 units.

Question 8

Pete Co. is currently experiencing a $45,000 loss from the sale of its product. The company has received a special order for 1,800 units of its product. Costs incurred by Pete Co. are as follows:

If Pete Co. wants to earn $9,000 in pre-tax profit from the sale all its products, each unit of product in the special order should be sold at what price?

Accepted Answer

The answer of Pete Co. is currently experiencing a $45,000...

Question 9

To compute break-even for a company selling multiple products, which of the following is needed?

Accepted Answer

The answer of To compute break-even for a company selling...

Question 10

Use the following information to answer questions 
Orange Confectioners makes two products: chocolate almond bark and hand-dipped strawberries. The contribution margins of the almond bark and strawberries are $2.00 and $2.50 per pound, respectively. Fixed costs are $375,000.
-The almond bark and strawberries are sold in a 5:2 ratio. How many pounds of almond bark must be sold to break-even?

Accepted Answer

The answer of Use the following information to answer questions...

Question 11

Use the following information to answer questions 
Orange Confectioners makes two products: chocolate almond bark and hand-dipped strawberries. The contribution margins of the almond bark and strawberries are $2.00 and $2.50 per pound, respectively. Fixed costs are $375,000.
-Orange sells almond bark and strawberries in a 5:2 ratio. How many pounds of strawberries must be sold to break-even?

Accepted Answer

The answer of Use the following information to answer questions...

Question 12

Use the following information to answer questions 32 - 34:
In 2010, Printext estimates that for every two printers sold, the company will sell six ink cartridges. The products have a 2:6 ratio. Fixed production costs are $150,000 and fixed selling costs are $50,000. Printext's selling prices and variable expenses information are as follows:
 
-How many printers must be sold to break even?

Accepted Answer

The answer of Use the following information to answer questions...

Question 13

Use the following information to answer questions 32 - 34:
In 2010, Printext estimates that for every two printers sold, the company will sell six ink cartridges. The products have a 2:6 ratio. Fixed production costs are $150,000 and fixed selling costs are $50,000. Printext's selling prices and variable expenses information are as follows:
 
-How many ink cartridges must be sold to break even?

Accepted Answer

Without specific information on costs, prices, or any other relevant financial details, it's impossible to determine the correct number of ink cartridges needed to break even.

Question 14

Use the following information to answer questions 32 - 34:
In 2010, Printext estimates that for every two printers sold, the company will sell six ink cartridges. The products have a 2:6 ratio. Fixed production costs are $150,000 and fixed selling costs are $50,000. Printext's selling prices and variable expenses information are as follows:
 
-If the sales mix changed to 3:5 and Printext sold 2.700 printers, the company will incur a

Accepted Answer

The correct answer is A because the sales mix changed to 3:5 and Printext sold 2.700 printers, the company will incur a $ 16,400 loss.

Question 15

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Boca Inc.'s current product selling price is $70, variable cost per unit is $35, total fixed costs are $1,430,000, and sales volume is 150,000 units.
-The company estimates that a $10 reduction in selling price and an $80,000 increase in advertising will cause sales volume to increase by 20,000 units. What is the incremental profit or loss?

Accepted Answer

The answer of Use the following information to answer questions...

Question 16

Use the following information to answer questions 
Boca Inc.'s current product selling price is $70, variable cost per unit is $35, total fixed costs are $1,430,000, and sales volume is 150,000 units.
-The company is considering accepting an order to sell an additional 5,000 units for $40 per unit. Variable selling expenses will rise by $1 per unit because of an additional sales commission that would have to be paid and an additional $17,000 would need to be spent for fixed costs related to the order. By how much would profits increase or decrease if Boca accepts this special order?

Accepted Answer

The additional revenue from the special order is 5,000 units * $40/unit = $200,000. The additional variable costs are 5,000 units * $36/unit ($35 production cost + $1 sales commission) = $180,000. The additional fixed costs are $17,000. So, the net increase in profit is $200,000 - $180,000 - $17,000 = $3,000.

Question 17

Which of the following statements about break-even graphs is false?

Accepted Answer

The break-even point is actually where the total revenue line intersects with the total cost line, not the fixed cost line. Fixed costs remain constant regardless of the volume of units produced or sold, while total costs include both fixed and variable costs.

Question 18

The break-even point is shown on a BEP graph as the point at which the

Accepted Answer

The break-even point on a BEP graph is where the total costs line (which includes both fixed and variable costs) intersects with the total revenues line, indicating the point at which the business is neither making a profit nor a loss.

Question 19

A graph that shows profit and loss amounts at specific volume levels is a

Accepted Answer

A profit-volume graph specifically illustrates how profits change with different levels of production or sales volume, showing the relationship between profit and volume directly.

Question 20

A profit-volume graph specifically plots which of the following items?

Accepted Answer

The answer of A profit-volume graph specifically plots which of...

Quiz 12: Cost-Volume-Profit Analysis

Calgary Corp. desires a pre-tax income of $700,000. Anticipated sales are 5,000 units; variable costs per unit are $25; and fixed costs are $600,000. How much should the selling price per unit be to achieve the desired income?

Chelsea Co. projects the following cost information for the upcoming year: Chelsea Co.'s tax rate is 35%. If Chelsea Co. wants to earn $260,000 in after-tax profits and each product unit sells for $75, how many units of product must be sold?

A company could determine the effect that a 10% variable cost increase would have on total production costs by using

Andersen Electronics manufactures a product that sells for $100 per unit. Variable cost per unit is $60 and fixed costs per period are $120,000. If Andersen decreases variable costs by 5%, the company's break-even point in units would

The selling price of one unit of a product made by Ellis Corp. is $4.50. Variable cost per unit is $1.50. Fixed costs per period are $150,000. Ellis' variable costs increase by 20% and fixed costs decrease by 5%. These changes will cause the company BEP to

To compute break-even for a company selling multiple products, which of the following is needed?

Which of the following statements about break-even graphs is false?

The break-even point is shown on a BEP graph as the point at which the

A graph that shows profit and loss amounts at specific volume levels is a

A profit-volume graph specifically plots which of the following items?