Question 1

The following is Alsatia Corporation's contribution format income statement for last month:

Accepted Answer

The company has no beginning or ending inventories and produced and sold 10,000 units during the month.
Required:
a.What is the company's contribution margin ratio?
b.What is the company's break-even in units?
c.If sales increase by 100 units,by how much should net income increase?
d.How many units would the company have to sell to attain target profits of $225,000?
e.What is the company's margin of safety in dollars?
f.What is the company's degree of operating leverage?
a.Contribution margin ratio
CM ratio = Contribution margin ÷ Sales
= $500,000 ÷ $1,400,000 = 0.357
b.Break-even units   
Sales = Variable expenses + Fixed expenses + Profit
$140Q = $90Q + $300,000 + $0
$50Q = $300,000
Q = $300,000 ÷ $50 = 6,000 units
c.Increase in net income from additional sales of 100 units   
d.Sales to attain target profit
$140Q = $90Q + $300,000 + $225,000
$50Q = $525,000
Q = $525,000 ÷ $50 = 10,500 units
e.Margin of safety in dollars
Break-even sales = $140 per unit × 6,000 units = $840,000
Margin of safety in dollars = Sales - Break-even sales
= $1,400,000 - $840,000 = $560,000
f.Degree of operating leverage
Degree of operating leverage = Contribution margin ÷ Net income
= $500,000 ÷ $200,000 = 2.5

Question 2

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield a profit of $60,000?

Accepted Answer

A)  30,000 units. 
B)  37,500 units. 
C)  40,000 units. 
D)  65,000 units. 
A)  30,000 units. 
B)  37,500 units. 
C)  40,000 units. 
D)  65,000 units. B

Question 3

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),the break-even level of sales would be:

Accepted Answer

A)  the same as with the expected sales mix. 
B)  higher than with the expected sales mix. 
C)  lower than with the expected sales mix. 
D)  cannot be determined with the available data. 
A)  the same as with the expected sales mix. 
B)  higher than with the expected sales mix. 
C)  lower than with the expected sales mix. 
D)  cannot be determined with the available data. B

Question 4

The margin of safety percentage is computed as:

Accepted Answer

A)  Break-even sales/Total sales. 
B)  Total sales - Break-even sales. 
C)  (Total sales - Break-even sales)/Break-even sales. 
D)  (Total sales - Break-even sales)/Total sales. 
A)  Break-even sales/Total sales. 
B)  Total sales - Break-even sales. 
C)  (Total sales - Break-even sales)/Break-even sales. 
D)  (Total sales - Break-even sales)/Total sales.

Question 5

The break-even point is closest to:

Accepted Answer

A)  10,118 units. 
B)  19,111 units. 
C)  21,500 units. 
D)  24,000 units. 
A)  10,118 units. 
B)  19,111 units. 
C)  21,500 units. 
D)  24,000 units.

Question 6

In an absorption costing income statement,costs are grouped according to cost behaviour.

Accepted Answer

A) True 
 B)False

Question 7

Jones New York,a member of the Saville group of designers,currently sells men's and women's designer suits.The average selling price and variable cost for each suit are as follows:
Women's Price: $18.00 Men's Price: $15
Variable cost: $12.75 Variable cost: $10.5
Fixed costs are $30,000 and cannot be separated evenly between the two products.
Required:
a.What is the breakeven point in units for each type of suit assuming the sales mix is 2:1 in favour of Female suits? Total sales cannot exceed 7,000 units due to space constraints.
b.What is the operating income assuming the sales mix is 2:1 in favour of Female suits and sales total 9,900 suits?

Accepted Answer

a. )Let X = Breakeven in Male suits,2X =

Question 8

North Company sells a single product.The product has a selling price of $30 per unit and variable expenses of 70% of sales.If the company's fixed expenses total $60,000 per year,then it will have a break-even in sales dollars of:

Accepted Answer

A)  $42,000. 
B)  $60,000. 
C)  $85,714. 
D)  $200,000. 
A)  $42,000. 
B)  $60,000. 
C)  $85,714. 
D)  $200,000.

Question 9

The amount by which a company's sales can decline before losses are incurred is called the:

Accepted Answer

A)  contribution margin. 
B)  degree of operating leverage. 
C)  margin of safety. 
D)  break-even point. 
A)  contribution margin. 
B)  degree of operating leverage. 
C)  margin of safety. 
D)  break-even point.

Question 10

How many units need to be sold to earn an annual net income equal to 10% of sales?

Accepted Answer

A)  44,000 units. 
B)  53,200 units. 
C)  54,500 units. 
D)  47,500 units. 
A)  44,000 units. 
B)  53,200 units. 
C)  54,500 units. 
D)  47,500 units.

Question 11

The break-even point in units per year is:

Accepted Answer

A)  15,200. 
B)  26,600. 
C)  38,000. 
D)  40,000. 
A)  15,200. 
B)  26,600. 
C)  38,000. 
D)  40,000.

Question 12

A training and development organization has fixed costs of $1,200,000.They aid the unemployed by supplementing their incomes by $16,000 annually,while they acquire new employment skills.The budgeted appropriation for the year is $4,000,000 for all costs.How many individuals may receive financial assistance during a particular year?

Accepted Answer

$4,000,000 - $16,000

Question 13

In a contribution margin income statement,all manufacturing costs are deducted to get to contribution margin.

Accepted Answer

A) True 
 B)False

Question 14

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

Accepted Answer

A) True 
 B)False

Question 15

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve a net income of 10% of sales?

Accepted Answer

A)  $375,000. 
B)  $400,000. 
C)  $431,000. 
D)  $451,000. 
A)  $375,000. 
B)  $400,000. 
C)  $431,000. 
D)  $451,000.

Question 16

The company's margin of safety as a percentage of sales (rounded to the nearest whole percent)is:

Accepted Answer

A)  12%. 
B)  33%. 
C)  50%. 
D)  67%. 
A)  12%. 
B)  33%. 
C)  50%. 
D)  67%.

Question 17

If the company's fixed costs decrease by 20% next year,all other factors remaining the same,the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

Accepted Answer

A)  200 unit increase. 
B)  200 unit decrease. 
C)  440 unit decrease. 
D)  no change in the break-even point in units. 
A)  200 unit increase. 
B)  200 unit decrease. 
C)  440 unit decrease. 
D)  no change in the break-even point in units.

Question 18

The contribution margin is:

Accepted Answer

A)  $72,000. 
B)  $240,000. 
C)  $560,000. 
D)  $632,000. 
A)  $72,000. 
B)  $240,000. 
C)  $560,000. 
D)  $632,000.

Question 19

The Board of Directors of Ryan Corporation have decided that they wish to expand the charity's work so as to serve 20,000 families per year.The cost of each box of food will remain the same but there will be added fixed costs of $100,000 per year.How much must the organization raise in total to serve the 20,000 families?

Accepted Answer

X = (20,00

Question 20

Using variable costing,what is the net income for January?

Accepted Answer

A)  $134,000. 
B)  $136,000. 
C)  $158,000. 
D)  $185,000. 
A)  $134,000. 
B)  $136,000. 
C)  $158,000. 
D)  $185,000.

The following is Alsatia Corporation's contribution format income statement for last month:

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield a profit of $60,000?

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),the break-even level of sales would be:

The margin of safety percentage is computed as:

The break-even point is closest to:

In an absorption costing income statement,costs are grouped according to cost behaviour.

North Company sells a single product.The product has a selling price of $30 per unit and variable expenses of 70% of sales.If the company's fixed expenses total $60,000 per year,then it will have a break-even in sales dollars of:

The amount by which a company's sales can decline before losses are incurred is called the:

How many units need to be sold to earn an annual net income equal to 10% of sales?

The break-even point in units per year is:

In a contribution margin income statement,all manufacturing costs are deducted to get to contribution margin.

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve a net income of 10% of sales?

The company's margin of safety as a percentage of sales (rounded to the nearest whole percent)is:

If the company's fixed costs decrease by 20% next year,all other factors remaining the same,the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

The contribution margin is:

Using variable costing,what is the net income for January?

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Flexible Budgets and Overhead Analysis

Decentralization

Relevant Costs for Decision Making

Capital Budgeting Decisions

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Exam 8: Standard Costs

The following is Alsatia Corporation's contribution format income statement for last month:

A product sells for $20 per unit and has a contribution margin ratio of 40%.Fixed expenses total $240,000 annually.How many units of the product must be sold to yield a profit of $60,000?

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe),the break-even level of sales would be:

The margin of safety percentage is computed as:

The break-even point is closest to:

In an absorption costing income statement,costs are grouped according to cost behaviour.

North Company sells a single product.The product has a selling price of $30 per unit and variable expenses of 70% of sales.If the company's fixed expenses total $60,000 per year,then it will have a break-even in sales dollars of:

The amount by which a company's sales can decline before losses are incurred is called the:

How many units need to be sold to earn an annual net income equal to 10% of sales?

The break-even point in units per year is:

In a contribution margin income statement,all manufacturing costs are deducted to get to contribution margin.

If the fixed expenses increase in a company,and all other factors remain unchanged,then one would expect the margin of safety to decrease.

Koby Co.has sales of $200,000 with variable expenses of $150,000,fixed expenses of $60,000,and a net loss of $10,000.How much would Koby have to sell in order to achieve a net income of 10% of sales?

The company's margin of safety as a percentage of sales (rounded to the nearest whole percent)is:

If the company's fixed costs decrease by 20% next year,all other factors remaining the same,the break-even level will change from that of the current year by (rounded your final answer to the nearest whole unit):

The contribution margin is:

Using variable costing,what is the net income for January?

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Flexible Budgets and Overhead Analysis

Decentralization

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

Filters