Question 1

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500.
- Compute the number of units of Product Z McCoy must sell to break even.

Accepted Answer

The answer of McCoy Brothers manufactures and sells two products,...

Question 2

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$

Total fixed costs are $340,000.
- The break-even point in composite units for the current sales mix (round to the nearest unit) is:

Accepted Answer

To find the break-even point in composite units, calculate the weighted average contribution margin per composite unit: (3 units of M * ($7-$3) + 1 unit of N * ($4-$2) + 2 units of O * ($6-$3)) = $18. The total contribution margin per composite unit is $18. Divide total fixed costs by this contribution margin: $340,000 / $18 = 18,889, which rounds to 17,000 composite units.

Question 3

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$
 Total fixed costs are $340,000. 
-The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

Accepted Answer

First, we need to calculate the weighted average unit price for the three products using the sales mix ratio:

M: 3/6 = 0.5
N: 1/6 = 0.1667
O: 2/6 = 0.3333

Weighted average unit price = (11 * 0.5) + (15 * 0.1667) + (20 * 0.3333) = $14.67

Next, we can calculate the contribution margin per composite unit by subtracting the variable cost per composite unit from the weighted average unit price:

Contribution margin per composite unit = $14.67 - $9 = $5.67

Finally, we can use the contribution margin per composite unit and the total fixed costs to calculate the breakeven point in composite units:

Breakeven point in composite units = $340,000 / $5.67 = 60,042 units

Since the sales mix ratio is 3:1:2, we can calculate the number of composite units sold for each product:

M: 3/6 * 60,042 = 30,021 units
N: 1/6 * 60,042 = 10,007 units
O: 2/6 * 60,042 = 20,014 units

The total revenue for each product can be calculated by multiplying the unit price by the number of units sold:

M: 30,021 * $11 = $330,231
N: 10,007 * $15 = $150,105
O: 20,014 * $20 = $400,280

The total revenue for all products is $880,616. Dividing this by the total number of composite units sold (60,042) gives us the selling price per composite unit:

Selling price per composite unit = $880,616 / 60,042 = $14.66, rounded to the nearest cent

Therefore, the answer is B) $37.00.

Question 4

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000.
- Compute the contribution margin per unit.

Accepted Answer

The answer of Flannigan Company manufactures and sells a single...

Question 5

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. 
-The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin ratio per composite unit (rounded to the nearest whole percentage).

Accepted Answer

To calculate the contribution margin ratio per composite unit, we need to calculate the weighted average contribution margin per unit across all three styles of bicycles.

Weighted average contribution margin per unit = (5 x $105 + 9 x $450 + 6 x $500) / 20 = $9,150 / 20 = $457.50

Contribution margin ratio per composite unit = ($457.50 / selling price of all units) x 100

Selling price of all units = (5 x $300) + (9 x $850) + (6 x $1,000) = $23,550

Contribution margin ratio per composite unit = ($457.50 / $23,550) x 100 = 1.94 x 100 = 194%

Therefore, the answer is C - 50%.

Question 6

Kent Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. 
-Compute the revised break-even point in dollars with the purchase of the new machine.

Accepted Answer

The answer of Kent Manufacturing produces a product that sells...

Question 7

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500.
- The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin per composite unit.

Accepted Answer

The answer of Barclay Enterprises manufactures and sells three distinct...

Question 8

Kent Manufacturing produces a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. 
-What effect would the purchase of the new machine have on Kent's break-even point in units?

Accepted Answer

The new machine increases fixed costs by $11,400 but decreases variable costs by $3.50 per unit. The decrease in variable costs reduces the contribution margin per unit from $26 to $29.50. The new break-even point is calculated as $271,400 / $29.50 = 9,200 units, compared to the old break-even point of $260,000 / $26 = 10,000 units, resulting in an 800 unit decrease.

Question 9

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500.
- Compute the contribution margin per composite unit.

Accepted Answer

We need to first calculate the weighted average contribution margin per unit.
Weighted average contribution of A = ($75 - $35) * 5/7 = $200/ unit
Weighted average contribution of Z = ($95 - $40) * 2/7 = $150/ unit

Therefore, the weighted average contribution margin per unit = $200 * 5/7 + $150 * 2/7 = $310/ unit
The fixed cost per unit can be calculated as $418,500/ (5+2) units = $69,750/ unit

Hence, the contribution margin per composite unit = weighted average contribution margin per unit - fixed cost per unit = $310 - $69,750 = $240

Therefore, the best choice is E, as it matches with the calculated contribution margin per composite unit.

Question 10

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. 
-Compute the contribution margin per unit if the machine is purchased.

Accepted Answer

The answer of Kent Manufacturing produces a product that sells...

Question 11

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. 
-The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in composite units (rounded to the nearest whole unit).

Accepted Answer

The answer of Barclay Enterprises manufactures and sells three distinct...

Question 12

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. 
-The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's selling price per composite unit.

Accepted Answer

The answer of Barclay Enterprises manufactures and sells three distinct...

Question 13

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$

Total fixed costs are $340,000.
- The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

Accepted Answer

To find the break-even point in sales dollars, calculate the weighted average contribution margin per unit, then divide total fixed costs by this margin. The contribution margins are $4 for M, $2 for N, and $3 for O. The sales mix is 3:1:2, so the weighted average contribution margin is $(3/6 \times 4) + (1/6 \times 2) + (2/6 \times 3) = 3.5$. The break-even point is $340,000 / 3.5 = $97,143 in units. Convert to sales dollars using the average sales price per unit: $(3/6 \times 7) + (1/6 \times 4) + (2/6 \times 6) = 6.48$. Thus, $97,143 \times 6.48 = $629,000.

Question 14

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$

Total fixed costs are $340,000. 
-The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:

Accepted Answer

The answer of Madison Corporation sells three products (M, N,...

Question 15

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000.
- Compute the contribution margin ratio.

Accepted Answer

The contribution margin per unit is $450 - $270 = $180. The contribution margin ratio is $180 / $450 = 0.40 or 40.0%.

Question 16

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500.
- Compute the number of units of Product A McCoy must sell to break even.

Accepted Answer

Let X be the number of units of A that must be sold to break even. Then the number of units of Z that must be sold to break even is 2/5 X (since the ratio of A to Z sold is 5:2).

The total revenue (TR) can be expressed as TR = 75X + 95(2/5)X = 75X + 38X = 113X.

Total variable costs (TVC) can be expressed as TVC = 35X + 40(2/5)X = 35X + 16X = 51X.

The contribution margin (CM) can be expressed as CM = TR - TVC = 62X.

To break even, CM must equal total fixed costs (TFC):

62X = $418,500

X = $418,500 / 62

X ≈ 6,750

Therefore, McCoy Brothers needs to sell 6,750 units of product A to break even.

Question 17

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500.
- Compute the break-even point in composite units.

Accepted Answer

The answer of McCoy Brothers manufactures and sells two products,...

Question 18

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit.
- Compute the revised break-even point in units if the new machine is purchased.

Accepted Answer

The answer of Kent Manufacturing produces a product that sells...

Question 19

Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?

Accepted Answer

The answer of Mott Company's sales mix is 3 units...

Question 20

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. 
-The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in total sales dollars.

Accepted Answer

The answer of Barclay Enterprises manufactures and sells three distinct...

Quiz 21: Cost-Volume-Profit Analysis

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the number of units of Product Z McCoy must sell to break even.

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. - Compute the contribution margin per unit.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the contribution margin per composite unit.

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. Annual fixed costs are $800,000. Current sales volume is $4,200,000. - Compute the contribution margin ratio.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the number of units of Product A McCoy must sell to break even.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. - Compute the break-even point in composite units.

Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?