Unit 1
Company XYZ sells three products: rocks, paper, and scissors. The rocks' contribution
margin (CM) per unit is highest and the scissors' CM per unit is lowest. Which one of the
following events will increase the company's overall break-even point?
a) A decrease in the cost of direct materials used in all three products
b) Increasing scissors' selling price
c) An increase in the cost of direct materials used in all three products
d) An increase in the demand for rocks - answerc) An increase in the cost of direct
materials used in all three products
A company has provided the following data:Sales2,000 unitsSales price$50/unitVariable
cost$30/unitFixed cost$25,000If the variable cost per unit is decreased by 10%, the total
fixed cost is increased by 20%, and all other factors remain the same, what will be the
effect on operating income?
a) It will decrease by $5,000
b) It will decrease by $1,000
c) It will increase by $1,000
d) It will increase by $6,000 - answerc) It will increase by $1,000
UCB has the following financial results for the month of June:Sales$3,120,000 Variable
costs1,920,000Contribution margin1,200,000 Fixed costs
1,380,000Profit/loss$(180,000)A total of 200,000 units were produced and sold during
the month of June. In order to break even, how many units should be produced and
sold?
a) 143,750 units
b) 200,000 units
c) 230,000 units
d) 3,588,000 units - answerc) 230,000 units
The James Company requires 22,223 units to be sold to break even. The sales price
per unit is $10 and variable costs per unit are $5.50. How much were the total fixed
costs for this company?
a) $100,004
b) $122,227
c) $222,230
d) $111,115 - answera) $100,004
The contribution margin ratio (CM ratio) is:
, a) revenues equalling costs.
b) the CM converted to a percentage by dividing the CM dollar value by the variable
costs.
c) fixed costs less target profit.
d) the CM converted to a percentage by dividing the CM dollar value by the sales value.
- answerd) the CM converted to a percentage by dividing the CM dollar value by the
sales value.
J&J Co. produces alarm system keypads. The sales price of each unit is $12.50 and the
variable costs per unit are $10. The total fixed costs are $100,000. How many units
does J&J need to sell in order to earn a profit of $150,000?
a) 20,000
b) 25,000
c) 40,000
d) 100,000 - answerd) 100,000
Ringo and Paul Corp. has a line of edible straws. What is the contribution margin per
unit of the edible straws, which have the following cost breakdown?fixed costs of
$88,000a break-even of 27,000 units variable costs of $20,000
a) $3.26
b) $4.00
c) $5.75
d) Indeterminable with the information provided - answera) $3.26
Mane and Guchey Ltd. (MGL) is a watch manufacturer in Brampton, Ontario. Its
owners, Rob Mane and Celeste Guchey, are analyzing last year's results: TotalPer unit
Sales (10,000 units)$250,000$25.00 Variable costs: Direct manufacturing90,0009.00
Manufacturing overhead20,0002.00 Selling and administration 5,0000.50 Contribution
margin (CM)135,00013.50 Fixed costs: Selling and administration20,0002.00
Manufacturing overhead25,0002.50 Pre-tax income$90,0009.00 They are considering a
new piece of machinery that is estimated to increase sales by 2,000 units and will
increase variable manufacturing overhead by 0.50 per unit. To accommodate the new
machinery, they will need to expand their operations plant to the factory next door,
increasing their lease by $20,000 fixed costs.What is the change to pre-tax income if
MGL implements this new piece of machinery?
a) Decrease by $21,000
b) Increase by $1,000
c) Increase by $30,0 - answerb) Increase by $1,000
A product is being produced that requires manufacturing space costing $1,000 per
month and the lease of equipment for $700 per month. The material cost will be $12 per
Company XYZ sells three products: rocks, paper, and scissors. The rocks' contribution
margin (CM) per unit is highest and the scissors' CM per unit is lowest. Which one of the
following events will increase the company's overall break-even point?
a) A decrease in the cost of direct materials used in all three products
b) Increasing scissors' selling price
c) An increase in the cost of direct materials used in all three products
d) An increase in the demand for rocks - answerc) An increase in the cost of direct
materials used in all three products
A company has provided the following data:Sales2,000 unitsSales price$50/unitVariable
cost$30/unitFixed cost$25,000If the variable cost per unit is decreased by 10%, the total
fixed cost is increased by 20%, and all other factors remain the same, what will be the
effect on operating income?
a) It will decrease by $5,000
b) It will decrease by $1,000
c) It will increase by $1,000
d) It will increase by $6,000 - answerc) It will increase by $1,000
UCB has the following financial results for the month of June:Sales$3,120,000 Variable
costs1,920,000Contribution margin1,200,000 Fixed costs
1,380,000Profit/loss$(180,000)A total of 200,000 units were produced and sold during
the month of June. In order to break even, how many units should be produced and
sold?
a) 143,750 units
b) 200,000 units
c) 230,000 units
d) 3,588,000 units - answerc) 230,000 units
The James Company requires 22,223 units to be sold to break even. The sales price
per unit is $10 and variable costs per unit are $5.50. How much were the total fixed
costs for this company?
a) $100,004
b) $122,227
c) $222,230
d) $111,115 - answera) $100,004
The contribution margin ratio (CM ratio) is:
, a) revenues equalling costs.
b) the CM converted to a percentage by dividing the CM dollar value by the variable
costs.
c) fixed costs less target profit.
d) the CM converted to a percentage by dividing the CM dollar value by the sales value.
- answerd) the CM converted to a percentage by dividing the CM dollar value by the
sales value.
J&J Co. produces alarm system keypads. The sales price of each unit is $12.50 and the
variable costs per unit are $10. The total fixed costs are $100,000. How many units
does J&J need to sell in order to earn a profit of $150,000?
a) 20,000
b) 25,000
c) 40,000
d) 100,000 - answerd) 100,000
Ringo and Paul Corp. has a line of edible straws. What is the contribution margin per
unit of the edible straws, which have the following cost breakdown?fixed costs of
$88,000a break-even of 27,000 units variable costs of $20,000
a) $3.26
b) $4.00
c) $5.75
d) Indeterminable with the information provided - answera) $3.26
Mane and Guchey Ltd. (MGL) is a watch manufacturer in Brampton, Ontario. Its
owners, Rob Mane and Celeste Guchey, are analyzing last year's results: TotalPer unit
Sales (10,000 units)$250,000$25.00 Variable costs: Direct manufacturing90,0009.00
Manufacturing overhead20,0002.00 Selling and administration 5,0000.50 Contribution
margin (CM)135,00013.50 Fixed costs: Selling and administration20,0002.00
Manufacturing overhead25,0002.50 Pre-tax income$90,0009.00 They are considering a
new piece of machinery that is estimated to increase sales by 2,000 units and will
increase variable manufacturing overhead by 0.50 per unit. To accommodate the new
machinery, they will need to expand their operations plant to the factory next door,
increasing their lease by $20,000 fixed costs.What is the change to pre-tax income if
MGL implements this new piece of machinery?
a) Decrease by $21,000
b) Increase by $1,000
c) Increase by $30,0 - answerb) Increase by $1,000
A product is being produced that requires manufacturing space costing $1,000 per
month and the lease of equipment for $700 per month. The material cost will be $12 per
