Question 1

Using the contribution margin approach, find the breakeven point in units for Consumer Products if the selling price per unit is $12, the variable cost per unit is $6, and the fixed costs are $8,040.

Accepted Answer

The formula for calculating the breakeven point in units using contribution margin approach is:

Breakeven Point in Units = Fixed Costs / Contribution Margin per Unit

Contribution Margin per Unit = Selling Price per Unit - Variable Cost per Unit

Plugging in the given values:

Contribution Margin per Unit = $12 - $6 = $6

Breakeven Point in Units = $8,040 / $6 = 1,340

Therefore, the breakeven point in units is 1,340, which is option C.

Question 2

How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

Accepted Answer

The answer of How many units must BAC Company sell...

Question 3

The equation that will provide the breakeven point in units (SP = selling price) is

Accepted Answer

The formula to find the break-even point in units is BE units = FC / (SP per unit - VC per unit). This can be rearranged to BE units = FC / CM per unit, where CM (contribution margin) per unit = SP per unit - VC per unit. Choice C provides this formula by dividing FC by CM per unit.

Question 4

In a graph of cost-volume-profit analysis, the

Accepted Answer

The slope of the total cost line in a cost-volume-profit (CVP) analysis graph is determined by the variable cost per unit. This is because as production or sales volume increases, total costs increase at a rate proportional to the variable cost per unit. Fixed costs do not affect the slope since they remain constant regardless of the volume of production or sales.

Question 5

At production levels beyond the breakeven point,

Accepted Answer

At production levels beyond the breakeven point, the company is producing enough output to cover both its variable and fixed costs. As a result, any additional units produced and sold will contribute towards profit, making the overall profit positive.

Question 6

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000.
- What is Christian Company's breakeven point in sales dollars?

Accepted Answer

The answer of Christian Company's sales revenue for 20xx was...

Question 7

The breakeven point is the point at which

Accepted Answer

The breakeven point is the point at which the contribution margin, which is the difference between sales and variable costs, equals fixed costs. At this point, the company is neither making a profit nor incurring a loss. Therefore, option B is the correct choice.

Question 8

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. 
-What is Christian Company's breakeven point in units?

Accepted Answer

The answer of Christian Company's sales revenue for 20xx was...

Question 9

A crystal goblet sells for $50 per goblet. The contribution margin per goblet is $14. Total monthly fixed costs are estimated to be $120,400. The monthly breakeven point in goblets is

Accepted Answer

The answer of A crystal goblet sells for $50 per...

Question 10

At the breakeven point, the contribution margin

Accepted Answer

At the breakeven point, total revenue equals total costs. This means that the contribution margin, which is the revenue minus variable costs, equals the fixed costs. Therefore, option C is the correct answer. Option A is incorrect because there is no maximum contribution margin at the breakeven point. Option B is incorrect because a positive contribution margin minus fixed costs equals the profit, not the breakeven point. Option D is incorrect because there is no minimum contribution margin at the breakeven point.

Question 11

How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

Accepted Answer

To break even, the total revenue must equal the total cost. The total cost is the sum of fixed costs and variable costs, which is expressed as:

Total Cost = (Variable Cost per unit × Number of units) + Fixed Cost

Let X be the number of units that must be sold to break even. Then, we have:

Total Revenue = Selling Price per unit × Number of units = $8.50X

Total Cost = (Variable Cost per unit × Number of units) + Fixed Cost = $4.00X + $9,000

Setting Total Revenue equal to Total Cost, we get:

$8.50X = $4.00X + $9,000

Solving for X, we have:

$4.50X = $9,000

X = $9,000 ÷ $4.50 = 2,000 units

Thus, the company must sell 2,000 units to break even. The total revenue required to sell 2,000 units is:

Total Revenue = Selling Price per unit × Number of units = $8.50 × 2,000 = $17,000

Therefore, the answer is D: $17,000.

Question 12

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $31,680.
- The breakeven point in sales dollars is

Accepted Answer

The breakeven point in sales dollars is calculated using the formula: Breakeven Point = Fixed Costs / (1 - (Variable Costs / Selling Price)). Plugging in the given numbers: $31,680 / (1 - ($24 / $42)) = $31,680 / (1 - 0.5714) = $31,680 / 0.4286 = $73,920.

Question 13

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $31,680.
- The breakeven point in watches per month is

Accepted Answer

The breakeven point in units can be calculated using the formula: Breakeven Point (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given numbers: $31,680 / ($42 - $24) = $31,680 / $18 = 1,760 watches.

Question 14

Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity: $\begin{array}{|l|l|l|}
\hline & \text { Total Service Overliead } & \text { Cases Worked } \
\hline \text { March } & \$ 22,900 & 112 \
\hline \text { Apri1 } & 20,800 & 98 \
\hline \text { May } & 26,400 & 138 \
\hline & &
\end{array}$
 The formula for total service overhead costs is

Accepted Answer

To determine the formula for total service overhead costs, we need to use the high-low method. Using the given data, the highest level of activity (cases) is 70, and the corresponding total service overhead cost is $16,400. The lowest level of activity is 40, with a corresponding cost of $9,200. 
Using these values, we can calculate the variable cost per case as (16,400-9,200)/(70-40) = $140. The fixed cost is calculated as the total cost at either activity level minus the variable cost component: 
Fixed cost = Total cost - (Variable cost per case x Number of cases)
Using the highest activity level: 
Fixed cost = 16,400 - (140 x 70) = $7,080
Therefore, the formula for total service overhead costs is $7,080 + $140 per case. The correct answer is D.

Question 15

Trawest, Inc., has prepared the following data: $\begin{array}{|l|l|l|l|}
\hline & \text { Unit SalesPrice } & \text { Unit Variable Costs } & \text { Unit Sales } \
\hline \text { Prochuct A } & \$ 34.00 & \$ 20.00 & 35,000 \
\hline \text { Prochuct B } & 26.00 & 14.50 & 7,000 \
\hline \text { Prochuct C } & 18.00 & 10.50 & 14,000 \
\hline & & &
\end{array}$
 The sales mix for Products A, B, and C is

Accepted Answer

To calculate the sales mix percentages, first, find the total units sold: $35,000 + 7,000 + 14,000 = 56,000$. Then, calculate the percentage of total sales for each product: Product A = $35,000 / 56,000 = 62.5%$, Product B = $7,000 / 56,000 = 12.5%$, Product C = $14,000 / 56,000 = 25%$.

Question 16

Contribution margin equals sales minus

Accepted Answer

Contribution margin is the amount of revenue that remains after deducting variable costs. Therefore, contribution margin equals sales minus variable costs, not fixed costs or total costs (which includes both fixed and variable costs) or cost of goods sold (which may include fixed and variable costs).

Question 17

When fixed costs are $46,500, the variable cost is $12 per unit, and the product sells for $22 per unit, the breakeven point is

Accepted Answer

The answer of When fixed costs are $46,500, the variable...

Question 18

Manix Company has gathered the following data: $\begin{array}{|l|l|l|l|}
\hline & \text { Unit SalesPrice } & \text { Unit Variable Costs } & \text { Unit Sales } \
\hline \text { Product 1 } & \$ 18.00 & \$ 10.00 & 24,500 \
\hline \text { Product 2 } & 27.00 & 17.00 & 17,500 \
\hline \text { Product 3 } & 35.00 & 28.00 & 28,000 \
\hline & & &
\end{array}$
 Fixed costs are $233,280. The weighted-average breakeven point is

Accepted Answer

The weighted-average breakeven point formula is:
Breakeven point (in units) = Fixed costs ÷ (Weighted-average unit contribution margin)
First, we need to calculate the weighted-average unit contribution margin:
(5,000 units × $25) + (10,000 units × $20) + (15,000 units × $15) = $245,000
$245,000 ÷ 30,000 units = $8.17
Now, we can use the formula to calculate the breakeven point:
Breakeven point (in units) = $233,280 ÷ $8.17 = 28,575.7
Rounding up to the nearest hundred gives us the answer of 28,800 units.

Question 19

The breakeven point is

Accepted Answer

The breakeven point is the level of activity where total revenue equals total costs. This means that the company is neither making a profit nor incurring a loss at this level of output.

Question 20

When fixed costs are $18,000 and the contribution margin per unit is $4, the breakeven point is

Accepted Answer

Breakeven point (in units) = Fixed costs / Contribution margin per unit

Substituting the given values, we get:

Breakeven point (in units) = $18,000 / $4

Breakeven point (in units) = 4,500 units

Quiz 5: Cost Behavior Analysis