24. Most Valuable Professor Mullen Company sells MP3 players for (SP) S60 each.

Question

24. Most Valuable Professor Mullen Company sells MP3 players for (SP) S60 each. Variable costs ariable costs (ViC) are $40 per unit, and fixed costs (F/C) total S60,000. How many MP3 players must VP Mullen sell to earn net income (NI or TP) of $140,000? A) 10,000. B) 3,500. C) 2,500. D) 3,000. 25. Best French Wine Ever Made By Professor Mullen Winery has fixed costs (F/C) of s 12,000 per year. Its warehouse sells wine with variable costs (V/C) of 80% of its unit selling price. How much in sales (BEP SS) does Best French Wine Ever Made By Professor Mullen need to break even per year? A) $9,600 B) $2,400 C) $15,000 D) $60,000 26. A company requires S1,700,000 in total budgeted sales (SP) to meet its net income target. Its contribution margin (CM) is 30%, and fixed costs (FC) are S300,000, what is the target net income (TP or NID)? A) $510,000 B) $390,000 C) $700,000 D) $210,000 27. The Best Professor of Accounting at City College of San Francisco, Inc. wants to sell a sufficient quantity of products to earn a profit (TP or NID) of $60,000. If the unit sales price (SP) is S10, unit variable cost (V/C) is S8, and total fixed costs (F/C) are S120,000, how many units must be sold (BEP SS with TP) to earn income of $60,000? (Hint: TP = $60,000) A) 90,000 units B) 60,000 units C) 22,500 units D) 900,000 units 28. Most Ingenious Games and Toys Made by the Absolute Brilliant Professor Professor Mullen Inc has actual sales (SP) of $400,000 and a break-even point (BEP SS Sales) of $280,000. How Safety in ss, then compute MS %) is its margin of safety ratio(MS %)? (Hint: compute Margin of A) 30% C) 143% D) 43% Page 6

Explanation / Answer

Q24. Selling Price $60 Variable Cost (VC) $40 Fixed Cost (FC) $60,000 No. of Units assumed to be x Required Profit (NI) $140,000 Equation Sales - VC - FC = NI 60*x - 40*x - 60000 = 140000 20*x = 140000 + 60000 20*x = 200000 x= 10,000 Units Q25. Total Sales x Variable Cost 0.8x Fixed Cost $12,000 Equation x = 0.8x + 12000 0.2x = 12000 x = $60,000 Q26. Sales $1,700,000 Contribution Margin 30% of sales Variable Cost 70% of sales Variable Cost $1,190,000 Fixed Cost $300,000 Equation NI = Sales - Variable Cost - Fixed Cost Ni = 1700000 - 1190000 - 300000 NI= $210,000 Q27. Selling Price $10 Variable Cost (VC) $8 Fixed Cost (FC) $120,000 No. of Units assumed to be x Required Profit $60,000 Equation Sales - VC - FC = NI 10*x - 8*x - 120000 = 60000 2*x = 60000 + 120000 2*x = 180000 x= 90,000 Units Q28. Actual Sales $400,000 Breakeven Sales $280,000 Margin of safety Actual - Breakeven sales 400000 - 280000 Margin of safety $120,000 Margin of safety % = Margin of safety * 100 Current sales Margin of safety % 30.0%

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