nt Quiz The following information is for questions 1- A Company A currently sell
ID: 2342238 • Letter: N
Question
nt Quiz The following information is for questions 1- A Company A currently sells a product for $2 enwch Fixed cost and unit variable ont ane $12.500 and $0.8, respectively y A 1. What is the brenk-even point in units and in ales foliln rspectivdly a. 10,000 units and $20,000. b. 12,000 units and $24,000. c, 10,000 units and SI 5,000, d. 20,000 units and $20,000. 2. What is the contribution margin ratio? a, 20% b. 30%. e, 40%. d. 60%. 3. To reach a target profit of $33,000, how many units of ostput should be sold a. 22,500 units. b. 31,750 units. c. 37,500 units. d. 42,000 units. 4. I f variable cost per unit is increased by 15%, fixed cost is increased 10 S 15.120, mnd the unit price remains the same, what is the new breakeven point in sales dollans? a. $22,000. b. $24,000. e. $26,000, d. $28,000. a. Is more sensitive to economic fluctuations b. Has a high proportion of variable costs. c. Experiences a smaller break-even volume d. Has a low contribution margin per unit. 5. Relative to companies with low operating leverage, a company with high operating levernge a. Contribution margin. b. Margin of safety c. Gross margin. d. Target profit 6· The excess of actual or projected sales over the break-even sales is known asExplanation / Answer
(1)-Break Even Points in units and Sales Dollars
Contribution per unit = Selling price per unit – Variable cost per unit
= $2.00 - $0.80
= $1.20 per unit
Contribution Margin Ratio = [Contribution per unit / Selling price per unit] x 100
= [$1.20 / $2.00] x 100
= 60%
Break Even Points in units = Fixed Costs / Contribution per unit
= $12,000 / $1.20
= 10,000 Units
Break Even Points in sales dollars = Fixed Costs / Contribution margin ratio
= $12,000 / 0.60
= $20,000
Therefore, The Answer is (a).10,000 Units and $20,000
(2)-Contribution Margin Ratio
Contribution Margin Ratio = [Contribution per unit / Selling price per unit] x 100
= [$1.20 / $2.00] x 100
= 60%
(3)- Number of units of output to be sold to earn $33,000 Profit
= [Fixed Costs + Desired Profit] / Contribution per unit
= [$12,000 + 33,000] / $1.20
= $45,000 / $1.20
= 37,500 Units
(4)-New Break Even Point in sales Dollars
New Break Even Points in sales dollars = New Fixed Costs / New Contribution margin ratio
New Contribution per unit = Selling price per unit – Variable cost per unit
= $2.00 – [$0.80 x 115%]
= $2.00 - $0.92
= $1.08
New Contribution Margin Ratio = [Contribution per unit / Selling price per unit] x 100
= [$1.08 / 2.00] x 100
= 54%
Therefore, The New Break Even Points in sales dollars = New Fixed Costs / New Contribution margin ratio
= $15,120 / 0.54
= $28,000
The Answer is “d. $28,000”
(5)-Relatives to companies with low operating leverage, a company with high operating leverage “Experiences a smaller Break Even volume”
(6)-The Answer is “B. Margin of Safety”
The formula for calculating the Margin of safety are as follows
Margin of Safety = Actual Total Sales – Break Even Sales
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