Question 1

The formula for operating income is

Accepted Answer

Operating income is calculated by subtracting the total variable and fixed costs from the sales revenue. The formula for operating income is therefore Sales revenue - variable costs - fixed costs.

Question 2

Nomad Company sells camera bags.The company purchases the bags from its supplier for $12 a bag and sells them to electronics stores for $25 a bag.Nomad's fixed costs are $39,000.What is Nomad's breakeven point in sales dollars?

Accepted Answer

The answer of Nomad Company sells camera bags.The company purchases...

Question 3

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per unit of $4. How many units must be sold to meet a target net income of $50,000, assuming a tax rate of 20%?

Accepted Answer

$50,000 ÷ 1 -.20 = $62,500; $62,500 + $160,000 ÷ $4 = 55,625

Question 4

Saira,Inc.is planning to sell 800,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Saira will break even at this level of sales, what are the fixed costs?

Accepted Answer

The answer of Saira,Inc.is planning to sell 800,000 units for...

Question 5

At the breakeven point the total contribution margin equals

Accepted Answer

At the breakeven point, a company has generated enough revenue to cover all of its variable costs and fixed costs. Therefore, the total contribution margin (revenue minus variable costs) is equal to the fixed costs. Gross margin and total costs are not relevant to the breakeven point calculation.

Question 6

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,what must her sales revenue be in order to reach her goal?

Accepted Answer

$20 - $8 ÷ $20 = .60; $20,000 + $40,000 ÷ .60 = $100,000

Question 7

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,how many units must she sell to reach her goal?

Accepted Answer

The answer of Barbara's Boutique wants to know what it...

Question 8

Bonita Corporation produces only one product.Monthly data include: selling price per unit, $42; unit variable expenses, $14; total fixed expenses, $84,000; actual sales for the month of June, 4,000 units. What is the margin of safety?

Accepted Answer

$84,000 ÷ $42 F1F1F1S1F1F1F10 $14 = 3,000; 4,000 - 3,000 x $42 = $42,000

Question 9

Assume total fixed costs of $160,000,variable costs per unit of $6, and contribution margin per unit of $4. How many units must be sold to meet a target operating income of $50,000?

Accepted Answer

The answer of Assume total fixed costs of $160,000,variable costs...

Question 10

A company requires $1,360,000 in sales to meet its net income target.Its contribution margin is 30%,and fixed costs are $240,000.What is the target operating income?

Accepted Answer

$1,360,000 x .30 - $240,000 = $168,000

Question 11

Cross Creek Company sells concrete culverts.Currently,the company's sales revenue is $900,000,variable costs total $450,000,and fixed costs total $300,000.If Cross Creek's controller has calculated the company's breakeven point to be $597,000,what is the company's margin of safety?

Accepted Answer

$900,000 - $597,000 = $303,000

Question 12

Miguel Manufacturing has fixed costs of $2,500,000 and variable costs are 40% of sales.What are the required sales if Montoya desires an operating income of $250,000?

Accepted Answer

$2,500,000 + $250,000 ÷ 1 -.40 = $4,583,333

Question 13

Breakeven point can be expressed in terms of

Accepted Answer

The answer of Breakeven point can be expressed in terms...

Question 14

The formula for calculating units required to meet target operating income is

Accepted Answer

This formula gives the required sales revenue to achieve the desired target operating income, by combining the fixed costs with the contribution margin per unit sold. It's a common formula used in the field of managerial accounting, and helps businesses to plan and budget their operations.

Question 15

Fixed costs are $600,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Accepted Answer

$600,000 ÷ 1.00 -.75 = $2,400,000

Question 16

Contribution margin is the amount

Accepted Answer

Contribution margin is the amount left over after subtracting variable costs from sales revenue. This amount is available to cover fixed costs and provide a profit.

Question 17

A company has total fixed costs of $200,000 and a contribution margin ratio of 20%.The total sales necessary to break even are

Accepted Answer

The answer of A company has total fixed costs of...

Question 18

On the breakeven graph,the point at which the total sales revenue line and the total cost line intersect is called

Accepted Answer

The point at which the total sales revenue line and total cost line intersect on the breakeven graph is called the breakeven point. This point represents the level of sales at which the company is neither making a profit nor a loss. It is an important metric for businesses to calculate as it helps to determine the minimum level of sales that must be achieved in order to cover all costs.

Question 19

The formula for calculating the sales dollars required to meet target operating income is

Accepted Answer

The formula for calculating the sales dollars required to meet target operating income is total fixed costs plus target operating income divided by contribution margin ratio. This formula takes into account both the fixed and variable costs, as well as the contribution margin which represents the amount of sales revenue that covers the variable costs and contributes towards covering fixed costs and operating income.

Question 20

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit?

Accepted Answer

The answer of At the break-even point of 2,000 units,...

Quiz 3: Cost-Volume-Profit Analysis and Pricing Decisions