Question 1

Benny Books sells first edition books.Benny purchases the books from his supplier for $100 a book and sells them through his website for $225 a book.Benny's fixed costs are $87,000.Benny's breakeven point in sales dollars is nearest to

Accepted Answer

A) $195,750. 
B) $156,600. 
C) $87,075. 
D) $60,300.

Question 2

Which of the following formulas is used to calculate the breakeven point in sales dollars?

Accepted Answer

A) Total fixed costs divided by contribution margin per unit. 
B) Total fixed costs divided by total contribution margin. 
C) Total fixed costs divided by contribution margin ratio. 
D) None of these formulas calculates the breakeven point in sales dollars.

Question 3

Bluegreen's most popular product has a variable cost of $43.56.On Bluegreen's income statement, the cost of goods sold per unit is $40.29.If Bluegreen's markup percentage on variable cost is 25% and its gross margin is 26%, what is the selling price of this product?

Accepted Answer

A) $54.45 
B) $58.08 
C) $58.86 
D) $53.72

Question 4

Changing a company's cost structure may affect

Accepted Answer

A) the sales mix. 
B) operating leverage. 
C) total sales revenue. 
D) the sales volume in units.

Question 5

The New Age Pet Store sells butterfly garden kits which includes a free-standing pop-up habitat and three varieties of butterfly larvae.New Age sells the kits for $30.The store pays $12 for the habitat and $8 for the butterfly larvae.Fixed costs are $5,000.
a.What is the contribution margin ratio for the butterfly garden kits?
b.What is the breakeven point in units?

Accepted Answer

The answer of The New Age Pet Store sells butterfly...

Question 6

On the breakeven graph, any level of sales to the left of the breakeven point represents

Accepted Answer

A) a fixed cost. 
B) a variable cost. 
C) operating income. 
D) an operating loss.

Question 7

Due to a recent increase in demand, Office Electronics has been able to sell its most expensive document shredder for a profit of 25%.
Required:
a.If Office Electronics sells the shredder for $250, what is the cost of the shredder assuming a 25% markup?
b.If Office Electronics were to reduce the cost of the shredder to $175, what would be the markup percentage at the $250 sales price?
c.If Office Electronics were to reduce the cost of the shredder to $175, what would be the sales price at a 25% gross margin?

Accepted Answer

The answer of Due to a recent increase in demand,...

Question 8

Cost-plus pricing implies that the cost of the seller's operational inefficiencies should be borne by the customer.

Accepted Answer

A) True 
 B)False

Question 9

Mounts CPA firm prepares approximately 1,200 individual tax returns each year.Since a majority of the cost of preparing tax returns results from the salary of the tax preparers and reviewers, Mounts charges customers a markup on labor rates.The highest paid preparers earn $30 per hour and are CPAs with several years' experience.Mounts charges its customers $45 per hour.If Mounts charges the same markup percentage to all clients, what price will Mounts charge for a less-experienced preparer who earns only $20 per hour?

Accepted Answer

A) $25 
B) $30 
C) $35 
D) $45

Question 10

Assume total fixed costs of $160,000, variable costs per unit of $6, and contribution margin per unit of $4.How many units must be sold to meet a target net income of $50,000, assuming a tax rate of 20%?

Accepted Answer

A) 55,625 
B) 52,500 
C) 50,000 d, 35,000

Question 11

A company with a high operating leverage will experience

Accepted Answer

A) a large percentage change in operating income as a result of a small percentage change in sales. 
B) a small percentage change in operating income as a result of a small percentage change in sales. 
C) the same percentage change in operating income as a result of a percentage change in sales. 
D) a small percentage change in operating income as a result of a large percentage change in sales.

Question 12

Saira, Inc.is planning to sell 800,000 units for $1.50 per unit.The contribution margin ratio is 20%.If Saira will break even at this level of sales, what are the fixed costs?

Accepted Answer

A) $240,000 
B) $560,000 
C) $800,000 
D) $960,000

Question 13

Spot-On wants to begin manufacturing and selling a new product, the Sporty Spot.Spot-On requires a 25% gross margin on all new products.Marketing research indicates customers are interested in purchasing the Sporty Spot.If the production supervisor has agreed to produce the Sporty Spot at its target cost of $6.75 per unit, what is the price customers are willing to pay for the Sporty Spot (if necessary, round your answer)?

Accepted Answer

A) $5.40 
B) $27.00 
C) $8.44 
D) $9.00

Question 14

Bivouac Camping Supply sells harsh weather tents.The company has the following income statement.  Required: 
a.What is the contribution margin per unit?
b.What is the contribution margin ratio?
c.What is the breakeven point in units? In sales dollars?
d.What is the margin of safety in units? In dollars?

Accepted Answer

The answer of Bivouac Camping Supply sells harsh weather tents.The...

Question 15

Companies that carry a high level of fixed costs relative to variable costs are considered to have greater risk than companies with a high level of variable costs relative to fixed costs.

Accepted Answer

A) True 
 B)False

Question 16

Assume a sales price per unit of $20, variable cost per unit $16, and total fixed costs of $168,000.What is the breakeven point in dollars?

Accepted Answer

A) $210,000 
B) $420,000 
C) $672,000 
D) $840,000

Question 17

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20, variable cost is $8, and fixed costs total $40,000, how many units must she sell to reach her goal?

Accepted Answer

A) 1,667 units 
B) 2,500 units 
C) 5,000 units 
D) 7,500 units

Question 18

On the breakeven graph, the point at which the total sales revenue line and the total cost line intersect is the breakeven point.

Accepted Answer

A) True 
 B)False

Question 19

Assume a sales volume of 6,000 units, unit selling price of $20, unit variable cost of $12, and total fixed costs of $20,000.What is the margin of safety in sales dollars?

Accepted Answer

A) $25,000 
B) $50,000 
C) $70,000 
D) $120,000

Question 20

Heart, Inc.'s breakeven point in sales dollars is $381,240 when its fixed costs are $183,978.Heart sells 2 products, Simple and Complex.Simple sells for $68 while Complex sells for $72.At the breakeven point, Heart must sell 1,890 units of Simple and 3,510 units of Complex.If Simple's variable costs are $44.20 per unit, what is the contribution margin of Complex (if necessary, round your answer to the nearest cent)?

Accepted Answer

A) $28.62 
B) $39.60 
C) $65.21 
D) $46.80

Exam 3: Costvolumeprofit Analysis and Pricing Decisions

Benny Books sells first edition books.Benny purchases the books from his supplier for $100 a book and sells them through his website for $225 a book.Benny's fixed costs are $87,000.Benny's breakeven point in sales dollars is nearest to

Which of the following formulas is used to calculate the breakeven point in sales dollars?

Bluegreen's most popular product has a variable cost of $43.56.On Bluegreen's income statement, the cost of goods sold per unit is $40.29.If Bluegreen's markup percentage on variable cost is 25% and its gross margin is 26%, what is the selling price of this product?

Changing a company's cost structure may affect

On the breakeven graph, any level of sales to the left of the breakeven point represents

Cost-plus pricing implies that the cost of the seller's operational inefficiencies should be borne by the customer.

Assume total fixed costs of $160,000, variable costs per unit of $6, and contribution margin per unit of $4.How many units must be sold to meet a target net income of $50,000, assuming a tax rate of 20%?

A company with a high operating leverage will experience

Saira, Inc.is planning to sell 800,000 units for $1.50 per unit.The contribution margin ratio is 20%.If Saira will break even at this level of sales, what are the fixed costs?

Companies that carry a high level of fixed costs relative to variable costs are considered to have greater risk than companies with a high level of variable costs relative to fixed costs.

Assume a sales price per unit of $20, variable cost per unit $16, and total fixed costs of $168,000.What is the breakeven point in dollars?

Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20, variable cost is $8, and fixed costs total $40,000, how many units must she sell to reach her goal?

On the breakeven graph, the point at which the total sales revenue line and the total cost line intersect is the breakeven point.

Assume a sales volume of 6,000 units, unit selling price of $20, unit variable cost of $12, and total fixed costs of $20,000.What is the margin of safety in sales dollars?