Question 1

The level of sales at which no profits are generated and no losses are incurred is the

Accepted Answer

The break-even point is the level of sales at which total revenues equal total costs, resulting in no profit or loss. This is the point where a business covers all its expenses, and any sales beyond this point contribute to profit.

Question 2

Which of the following is not an assumption of break-even analysis?

Accepted Answer

The correct assumption for contribution margin is that it is the difference between selling price and variable cost per unit, not total cost per unit.

Question 3

Managers of businesses are primarily interested in the break-even point because it provides

Accepted Answer

The break-even point is significant for managers because it represents the level of sales at which total revenues equal total costs, meaning no profit or loss is incurred. Beyond this point, the company starts earning profits.

Question 4

In break-even analysis,

Accepted Answer

An increase in contribution margin per unit (revenue per unit minus variable cost per unit) without an increase in total fixed costs will indeed cause a decrease in the break-even point, as fewer units will need to be sold to cover the fixed costs.

Question 5

The percentage of revenue that remains after variable costs are covered is the

Accepted Answer

The contribution margin ratio represents the percentage of revenue that remains after variable costs are covered, indicating how much revenue contributes to covering fixed costs and generating profit.

Question 6

Contribution margin is

Accepted Answer

Contribution margin is defined as the revenue remaining after variable costs are covered. It is used to cover fixed costs and to generate profit.

Question 7

In 2010, Edmonton Corporation sold 10,000 paperweights. Selling price was $60 per unit; variable costs were $20 per unit; and fixed costs for the year were $250,000. Contribution margin per paperweight was

Accepted Answer

The answer of In 2010, Edmonton Corporation sold 10,000 paperweights....

Question 8

Jackson Co. has the following revenue and cost information:

What is Jackson Co.'s break-even point?

Accepted Answer

The answer of Jackson Co. has the following revenue and...

Question 9

At Quebec Corp., selling price is $200 per unit. Fixed costs are $2,000,000 and expected contribution margin is 40%. If the company breaks even at this point, what is the break-even point in units?

Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is 40% of the selling price, which is $200 * 0.40 = $80. Therefore, the break-even point in units is $2,000,000 / $80 = 25,000 units.

Question 10

Use the following information to answer questions 
At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items.
 
-What is Starkville's contribution per unit?

Accepted Answer

The answer of Use the following information to answer questions...

Question 11

Use the following information to answer questions 
At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items.
 
-During 2010, Starkville produces 400,000 units (which is within its relevant range of activity). What is Starkville's total cost of production?

Accepted Answer

The answer of Use the following information to answer questions...

Question 12

Use the following information to answer questions 
At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items.
 
-If Starkville produced and sold 400,000 units, what was the contribution ratio (rounded to the nearest whole percent)?

Accepted Answer

The answer of Use the following information to answer questions...

Question 13

Use the following information to answer questions 
At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items.
 
-If Starkville produced and sold 400,000 units, what was its break-even point?

Accepted Answer

The answer of Use the following information to answer questions...

Question 14

Candy Corp. manufactures peppermints. The selling price and variable cost per pound of peppermints is $2.00 and $1.20 per pound, respectively. For 2010, Candy's fixed costs are $0.05 per unit. What is Candy's variable cost ratio?

Accepted Answer

The variable cost ratio is calculated as variable costs divided by sales price. Here, it's $1.20 (variable cost per pound) / $2.00 (selling price per pound) = 0.6 or 60%.

Question 15

Chesser Industries manufactures telescopes that sell for $200 each. Variable costs are $140 per unit and fixed costs are $360,000. What is Chesser's break-even point in sales dollars?

Accepted Answer

The answer of Chesser Industries manufactures telescopes that sell for...

Question 16

Anthony Industries manufactures lawnmowers. The selling price of a lawnmower is $300 and variable costs are $180 per unit. Fixed costs are $1,200,000 per period. What is Anthony's break-even point in units?

Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit (selling price - variable cost). Here, it is $1,200,000 / ($300 - $180) = 10,000 units.

Question 17

Atlantic Corporation manufactures lobster traps. Variable production costs per unit are $8 per unit and variable selling costs are $2 per unit. Fixed costs are $300,000. Atlantic's break-even point is 50,000 units. Ignoring taxes, what is the selling price of an Atlantic lobster trap?

Accepted Answer

The answer of Atlantic Corporation manufactures lobster traps. Variable production...

Question 18

K Inc. sells a single product that has the following production per unit costs: direct material, $15; direct labor, $4; variable overhead, $6; and fixed overhead, $2. The fixed overhead cost was calculated using 100,000 units of annual sales and production. Selling costs are $1 per unit and $179,200 of fixed costs. K's product sells for $50 per unit. If K Inc. wants to earn a pre-tax profit of $62,544, how many units must be sold?

Accepted Answer

To find the number of units needed to achieve the desired pre-tax profit, calculate the contribution margin per unit: Selling price ($50) - Variable costs ($15 + $4 + $6 + $1) = $24. Fixed costs are $179,200 + (100,000 units x $2 fixed overhead per unit) = $379,200. The required units = (Fixed costs + Desired profit) / Contribution margin per unit = ($379,200 + $62,544) / $24 = 18,406 units.

Question 19

Use the following information to answer questions 
Reliable Furniture manufactures recliners selling for $500 each. Variable costs per unit are $175 for direct material, $125 for direct labor, $35 for variable production overhead, and $15 for variable selling and administrative costs. Annual fixed costs are $200,000 for production overhead and $100,000 for selling and administrative costs. The company applies fixed production overhead to recliners based on a capacity of 20,000 units per year.
-Reliable Furniture's contribution margin ratio is

Accepted Answer

Contribution margin ratio = Contribution margin / Sales revenueContribution margin = Sales revenue - Variable costsSales revenue = $500 per unitVariable costs = $175 + $125 + $35 + $15 = $350 per unitContribution margin = $500 - $350 = $150 per unitContribution margin ratio = $150 / $500 = 30%

Question 20

Use the following information to answer questions 
Reliable Furniture manufactures recliners selling for $500 each. Variable costs per unit are $175 for direct material, $125 for direct labor, $35 for variable production overhead, and $15 for variable selling and administrative costs. Annual fixed costs are $200,000 for production overhead and $100,000 for selling and administrative costs. The company applies fixed production overhead to recliners based on a capacity of 20,000 units per year.
-Reliable Furniture's break-even point is

Accepted Answer

The answer of Use the following information to answer questions...

Quiz 12: Cost-Volume-Profit Analysis

The level of sales at which no profits are generated and no losses are incurred is the

Which of the following is not an assumption of break-even analysis?

Managers of businesses are primarily interested in the break-even point because it provides

In break-even analysis,

The percentage of revenue that remains after variable costs are covered is the

Contribution margin is

In 2010, Edmonton Corporation sold 10,000 paperweights. Selling price was $60 per unit; variable costs were $20 per unit; and fixed costs for the year were $250,000. Contribution margin per paperweight was

Jackson Co. has the following revenue and cost information: What is Jackson Co.'s break-even point?

At Quebec Corp., selling price is $200 per unit. Fixed costs are $2,000,000 and expected contribution margin is 40%. If the company breaks even at this point, what is the break-even point in units?

Use the following information to answer questions At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items. -What is Starkville's contribution per unit?

Use the following information to answer questions At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items. -If Starkville produced and sold 400,000 units, what was the contribution ratio (rounded to the nearest whole percent) ?

Use the following information to answer questions At an activity level of 350,000 units, Starkville Corp.'s revenue and cost structure includes the following items. -If Starkville produced and sold 400,000 units, what was its break-even point?

Candy Corp. manufactures peppermints. The selling price and variable cost per pound of peppermints is $2.00 and $1.20 per pound, respectively. For 2010, Candy's fixed costs are $0.05 per unit. What is Candy's variable cost ratio?

Chesser Industries manufactures telescopes that sell for $200 each. Variable costs are $140 per unit and fixed costs are $360,000. What is Chesser's break-even point in sales dollars?

Anthony Industries manufactures lawnmowers. The selling price of a lawnmower is $300 and variable costs are $180 per unit. Fixed costs are $1,200,000 per period. What is Anthony's break-even point in units?

Atlantic Corporation manufactures lobster traps. Variable production costs per unit are $8 per unit and variable selling costs are $2 per unit. Fixed costs are $300,000. Atlantic's break-even point is 50,000 units. Ignoring taxes, what is the selling price of an Atlantic lobster trap?