Chapter 3 Quiz

Raines Company's sales are $750,000 with operating profits of $130,000. If the contribution margin ratio is 40%, what did the fixed costs amount to? Multiple Choice $270,000. $370,000. $300,000. $170,000.

$170,000. ($750,000 × 0.40) − FC = $130,000, FC = $170,000.

Dartmount Corporation has provided its contribution format income statement for June. The company produces and sells a single product. Sales (2,900 units) $269,700 Variable costs 107,300 Contribution margin 162,400 Fixed costs 137,100 Operating profit $25,300 If the company sells 3,100 units, its total contribution margin should be closest to: Multiple Choice $27,045. $173,600. $162,400. $181,000.

$173,600. Sales (3,100 units)*$288,300 Variable costs 114,700 Contribution margin 173,600 Fixed costs 137,100 Operating profit$36,500 *Sales $269,700 ÷ 2,900 = $93.00 per unit Variable costs $107,300 ÷ 2,900 = $37.00 per unit Sales 3,100 units × $93 per unit = $288,300Variable costs 3,100 units × $37 per unit = $114,700

Gardner Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below. Sales $1,500,000 Cost of sales: Direct Material$250,000 Direct labor 150,000 Variable Overhead 75,000 Fixed Overhead 100,000 575,000 Gross Profit $925,000 Selling and G&A Variable 200,000 Fixed 250,000 450,000 Operating Income $475,000 The break-even point (rounded to the nearest dollar) for Gardner Corporation for the current year is: Multiple Choice $146,341. $729,730. $636,364. $181,818.

$636,364. $250,000 + $150,000 + $75,000 + $200,000 = $675,000 variable costs; ($1,500,000 − $675,000)/$1,500,000 = 55% contribution margin; ($100,000 + $250,000)/0.55 = $636,364 break-even.

Lamar has the following data: Selling Price$40 Variable manufacturing cost $22 Fixed manufacturing cost $150,000 per month Variable selling & administrative costs $6 Fixed selling & administrative costs $120,000 per month How many units must Lamar produce and sell in order to achieve a profit of $30,000 per month? Multiple Choice 8,824 units. 25,000 units. 10,000 units. 15,000 units.

25,000 units. ($150,000 + $120,000 + $30,000)/($40 − $22 − $6) = 25,000 units.

A company has provided the following data: Sales 3,000Units Sales price $70per unit Variable cost $50per unit Fixed cost $25,000 If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, operating profit will: Multiple Choice decrease by $3,125. decrease by $31,875. Correct increase by $20,625. decrease by $15,000.

decrease by $31,875.