Acc222H Exam 2

Gamma Beta Delta (GBD) fraternity plans to sell tshirts to raise money for charity. The charitable donation that GBD makes will equal its profit (i.e., operating income) from the sale of the tshirts. The fraternity expects the following revenues and costs related to the tshirt project: Revenues (675 shirts @ $20 per shirt) $13,500 Variable costs $9,450 Fixed costs $1,000 How much sales revenue must GBD earn from tshirts in order to make a charitable donation of $3,500?

$15,000

Information for Noble Company is as follows: Sales $400,000 Variable costs 100,000 Fixed costs 150,000 Calculate the break-even point in sales dollars.

$200,000

Sunrise Beverage Co. sells a single product, MorningTime Delite. Variable costs at Sunrise are two-fifths of its sales revenue. How much revenue does Sunrise need to earn in order to earn a target profit of $150,000 when it's fixed costs are $75,000?

$375,000

2. Marc Company sells a product for $20, incurs a variable cost of $12 per unit, and has total fixed costs of $6,000. What is the per-unit contribution margin?

$8

A company manufactures two products. Information about the two product lines for the current year is as follows: Product A Product B Selling price per unit $90 $120 Variable costs per unit $50 $60 The company expects fixed costs to be $70,000. Calculate the break-even quantity of each product when the sales mix is 2:1.

1,000 units, 500 units

Whittier Company plans to produce and sell 2,000 units next month. The following data is given. Per unit Total Selling price $50 Variable cost $24 Fixed costs $28,000 Calculate the break-even point in units.

1,077 units

Young Manufacturing Company plans to sell 600 units at $500 each in the following year. The data on costs is as follows: Variable cost $400 Total fixed cost $47,000 Operating Income $30,000 Calculate the degree of operating leverage.

2

Berghain Co. sells two products, Tablets and Capsules. Typically, it sells twice as many Tablets as Capsules. Per-unit revenues and costs appear below. Tablet Capsule Sales revenue $500 $800 Variable manufacturing cost $100 $150 Variable selling expense $130 $200 Contribution margin $270 $450 If Berghain's fixed costs total $990,000 per year, then how many Tablets must Berghain sell to break even?

2,000 tablets

2. Lauren Company plans to sell 3,000 units of a product at $500 each. For the product, unit variable cost is $380 and break-even units are 700. Calculate the margin of safety for Lauren in terms of the number of units.

2,300 units

Chief Enterprises produces a product that sells for $40 per unit. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity; fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin ratio for this product is:

40%

Honestly Partyin, Inc. produces and sells the finest Halloween masks in all of Butler County. The company expects the following revenues and costs in 2018 for its Halloween masks: Revenues (400 pinatas sold @ $60 per unit) $24,000 Variable costs $16,000 Fixed costs $10,000 How many masks must be sold in 2018 for Honestly Partyin, Inc. to reach its breakeven point?

500 units

1. Paule Company manufactures computers. The budgeted sales are $300,000, budgeted variable costs are $153,000, and budgeted fixed costs are $270,000. Calculate the variable cost ratio.

51%

The standard cost system differs from the actual cost system in the assignment of:

All manufacturing costs

To calculate adv or disadv from dropping a product

CM - avoidable FC

Break-even analysis assumes that:

Costs are a linear function of volume

1. If the gym's monthly unlimited plan cost $100 and the daily plan cost $12, Lacy would need to go to the gym at least 10 times per month for the monthly plan to be the better deal.

False

If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, 240 units must be sold to breakeven.

False

If the variable cost ratio is known, it can be subtracted from 100 to yield the contribution margin ratio.

False

2. Which of the following statements is true of relationship of fixed cost to contribution margin affect operating income?

If fixed cost equals contribution margin and operating income is zero, the company breaks even.

Which of the following is true about the materials price variance?

It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased

1. Which of the following is true of the break-even point?

It is the point where total revenue equals total cost.

3. Which of the following is true of standard quantity of materials allowed?

It is the product of unit quantity standard and actual output.

2. Which of the following statements is true of sales mix?

It is the relative combination of products being sold by a firm.

2. Which of the following is an advantage of standard product costing?

It provides readily available unit cost information that can be used for pricing decisions at any time throughout a period.

2. Which of the following is an assumption of CVP analysis?

Linear revenue and cost functions remain constant over the relevant range.

CM is referred to as

Marginal profit

1. Which of the following is the mathematical expression for calculating number of units to earn target income?

Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) ÷ Contribution Margin per Unit

1. Which of the following differentiates direct fixed expenses from common fixed expenses?

The direct fixed expenses are those fixed costs that can be traced to a segment, whereas the common fixed expenses are not traceable to the segments.

Which of the following is not true about materials variances?

The materials price variance uses the actual quantity of materials used rather than the actual quantity of materials purchased

2. If the gym's monthly unlimited plan cost $50 and the daily plan cost $8, Lacy should use the daily plan if she only intends to go to the gym 6 times per month.

True

Graphically, the breakeven point is where the contribution margin crosses the fixed cost line.

True

If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, the unit contribution margin is $7.50.

True

T or F 1. All inventories are carried at standard cost.

True

Tacos-2-Go could reduce their variable costs by shopping at wholesale supplies over local groceries.

True

The breakeven in sales dollars equation is total fixed expenses divided by the contribution margin ratio.

True

The contribution margin is the difference between sales and variables expenses.

True

Total fixed costs, price, and unit variable costs all have an impact on the breakeven point.

True

Which of the following formulas is used to calculate the standard quantity of material allowed for the actual output?

Unit quantity standard multiplied by actual output

The opportunity cost of making a part in a factory with excess capacity when there is no alternative use for that capacity is:

Zero

The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves

c. degree of operating leverage.

once break even is reached, each additional unit

contributes directly to profit

CVP assumptions

costs and revenues are linear in production volume selling price is constant no changes in inventories sales mix is constant

when no units are told, the firm's loss equals

its total FC

Steps for BE with sales mix

multiply CMs x sales mix and combine = total CM B/E bundles = FC / CM per bundle = # of bundles multiply by sales mix if needed

2. Assuming that fixed costs remain the same, the change in operating income from a change in revenues is calculated by.

multiplying the contribution margin ratio and the change in sales.

Under standard costing, costs are assigned to cost objects using

price and quantity standards for all manufacturing costs (we don't need to wait for actuals)

1. The margin of safety in dollars is calculated by.

subtracting the break-even sales from the actual sales.

Which of the following costs are always irrelevant in decision making?

sunk costs

Each unit sold reduces the firm's loss by

the amount of the unit contribution margin

We use a CVP model to estimate

the output we need to earn a target profit

Which of the following is correct? The break-even point for a firm occurs when:

total contribution margin equals total fixed costs

IF selling commission is paid on each unit sold it is a

variable cost

in the keep or discontinue decisions: Unavoidable fixed costs are

what we pay regardless of whether we discontinue or not

in the keep or discontinue decisions: Avoidable fixed costs are

what we save if we discontinue

1. In a cost-volume-profit graph, the break-even point lies at the point:

where the total revenue line and the total cost line intersect.