10. Below is a performance report that compares budgeted and actual profit of Fa
ID: 2455555 • Letter: 1
Question
10. Below is a performance report that compares budgeted and actual profit of Famous Beer
for the month of April:
Budget
Actual
Difference
Sales
$200,000
$202,000
$2,000
Less:
Cost of ingredients
$162,000
$166,000
$4,000
Salaries
$31,000
$31,200
$200
Controllable Profit
$47,000
$44,800
-$2,200
In evaluating the department in terms of its increase in sales and expenses, what will be
most important to investigate?
Sales
Cost of ingredients
Salaries
All three components have equal importance.
11.
Fatima’s Diner has a contribution margin ratio of 17%. If fixed costs are $176,800, how many dollars of revenue must Fatima’s generate in order to reach the break-even point?
A)
$282,880
B)
$1,040,000
C)
$1,060,800
D)
$1,105,000
12.
New Visions, Inc. is looking to achieve a net income of 15 percent of sales. Here’s the firm’s profile: Unit sales price is $10; variable cost per unit is $6; total fixed costs are $40,000. What is the level of sales in units required to achieve a net income of 15 percent of sales?
A)
12,000 units
B)
21,000 units
C)
16,000 units
D)
20,000 units
13.
At Zik’s Apparel, the break-even point is 2,400 units. If fixed costs total $300,000 and variable costs are $25 per unit, what is the selling price per unit?
A)
$210
B)
$180
C)
$5
D)
$150
Budget
Actual
Difference
Sales
$200,000
$202,000
$2,000
Less:
Cost of ingredients
$162,000
$166,000
$4,000
Salaries
$31,000
$31,200
$200
Controllable Profit
$47,000
$44,800
-$2,200
Explanation / Answer
10) The most important item to be investigated is the cost of ingredients. For a sale of 202,000, the budget allowance should be only 163,620, against which the actuals is 166,000; an adverse variance of 2380 $; an increase of 1.43%.
The increase in salaries is only 0.65%, which is comparatively less significant.
11) Answer - Option (B)
The break even dollar sales = fixed costs/contribution margin ratio = 176800/.17 = 1,040,000
12) Answer is Option C 16000 Units
can be solved from the equation Sales (S) = (40000+ 0.15S)0.4; 0.4 S = 40000 + 0.15 S; 0.25S = 40000
Therefore, S = 40000/0.25 = 160,000 $ = 16000 units
Check: Sales at 16000 units = 160000; profit will be = 160000*0.4 - 40000 = 24000 $ equal to 15% of sale of 160000
13) Answer = Option D - $ 150
can be solved from the following equation
2400 = 300000/(p - 25), where 'p' is the price per unit
2400(p-25) = 300000; 2400p = 300000 + 60000; p = 360000-2400 = 150 $
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