Question 1

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in sales dollars is
A) $48,240.
B) $32,160.
C) $56,280.
D) $40,200.

Accepted Answer

The formula to calculate the breakeven point in sales dollars is:

Breakeven Point = Fixed Costs / (1 - (Variable Costs / Sales Price))

Plugging in the given values, we get:

Breakeven Point = $24,120 / (1 - ($24 / $42)) = $56,280

Therefore, the answer is choice C.

Question 2

The breakeven point is the point at which
A) fixed costs equal variable costs.
B) contribution margin equals fixed costs.
C) sales equal variable costs.
D) fixed costs equal sales.

Accepted Answer

The breakeven point is the point at which the revenue generated by sales equals the total costs associated with producing and selling the product. The contribution margin is the difference between the sales price and variable costs per unit, which represents the amount available to cover fixed costs and contribute to profit. Therefore, the breakeven point occurs when the contribution margin equals fixed costs. Option A is incorrect because fixed costs are independent of the level of production, while variable costs change with the level of production. Option C is incorrect because at the breakeven point, sales revenue only covers the variable costs and not the fixed costs. Option D is incorrect because sales need not equal fixed costs for the company to break even.

Question 3

At the breakeven point, the contribution margin
A) is at a maximum.
B) minus total fixed costs equals a positive number.
C) equals fixed costs.
D) is at a minimum.

Accepted Answer

At the breakeven point, the total sales revenue equals the total variable costs plus total fixed costs. This means that the contribution margin (sales revenue minus variable costs) equals fixed costs. Therefore, option C is correct. Option A is incorrect because contribution margin is not maximum at breakeven point, it is zero. Option B is incorrect because at breakeven point, the contribution margin minus fixed costs equals zero, not a positive number. Option D is incorrect because there is no maximum or minimum contribution margin at breakeven point, it is zero.

Question 4

Manix Company has gathered the following data: $\begin{array}{rrrc} 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product 1 } & \$ 18.00 & \$ 10.00 & 24,500 \
\text { Product 2 } & 27.00 & 17.00 & 17,500 \
\text { Product 3 } & 35.00 & 28.00 & 28,000 \
\end{array}$ Fixed costs are $233,280. The weighted-average breakeven point is
A) 34,500 units.
B) 28,800 units.
C) 25,200 units.
D) 29,900 units.

Accepted Answer

To find the weighted-average breakeven point, calculate the contribution margin for each product, find the weighted average contribution margin, and divide the total fixed costs by this weighted average. The weighted-average breakeven point is 28,800 units.

Question 5

The breakeven point is
A) where fixed and variable costs reach the upper level of the relevant range.
B) the level of activity where all fixed costs are recovered.
C) where total revenue equals total costs.
D) where fixed costs meet variable costs.

Accepted Answer

The breakeven point is the point where the total revenue generated by sales equals the total cost of producing goods or services. This means that there is no profit or loss at this point, but rather a "break-even" point where the costs are covered by revenue.

Question 6

Contribution margin equals sales minus
A) cost of goods sold.
B) total costs.
C) fixed costs.
D) variable costs.

Accepted Answer

Contribution margin is the amount of revenue that remains after deducting variable costs. Therefore, the correct answer is D - variable costs. Options A, B, and C relate to total costs which include both variable and fixed costs.

Question 7

When fixed costs are $18,000 and the contribution margin per unit is $4, the breakeven point is
A) 4,500 units.
B) 2,230 units.
C) $22,300.
D) $72,000.

Accepted Answer

Breakeven point in units = Fixed costs / Contribution margin per unit
Breakeven point in units = $18,000 / $4 per unit
Breakeven point in units = 4,500 units

Question 8

Using the contribution margin approach, find the breakeven point in units for Consumer Products if the selling price per unit is $12, the variable cost per unit is $6, and the fixed costs are $8,040.
A) 670
B) 1,200
C) 1,340
D) 6,000

Accepted Answer

Breakeven point (in units) = Fixed Costs / Contribution Margin per unit
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $12 - $6 = $6

Breakeven point (in units) = $8,040 / $6 = 1,340 units.

Therefore, the best choice is C.

Question 9

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in units?
A) 43,200 units
B) 9,900 units
C) 26,182 units
D) 20,000 units

Accepted Answer

The breakeven point in units is calculated by dividing the fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price minus the variable cost per unit. With a 30% contribution margin, the contribution margin per unit is $5.50 * 0.30 = $1.65. The breakeven point is $33,000 / $1.65 = 20,000 units.

Question 10

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in watches per month is
A) 1,115 watches.
B) 1,590 watches.
C) 1,340 watches.
D) 1,780 watches.

Accepted Answer

To calculate the breakeven point, we need to use the formula:

Breakeven Point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Plugging in the given values:

Breakeven Point = $24,120 / ($42 - $24) = 1,340 watches

Therefore, the best choice is C) 1,340 watches. This is the number of watches that the company needs to sell in order to cover its fixed costs and break even. Any sales beyond this point will generate profit for the company.

Question 11

When fixed costs are $41,500, the variable cost is $12 per unit, and the product sells for $22 per unit, the breakeven point is
A) 4,150 units.
B) 8,300 units.
C) 2,075 units.
D) 6,225 units.

Accepted Answer

Breakeven point = Fixed costs / (Selling price per unit - Variable cost per unit)= 41,500 / (22 - 12)= 41,500 / 10= 4,150 units

Question 12

Trawest, Inc., has prepared the following data: $\begin{array}{rrrr} 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product A } & \$ 34.00 & \$ 20.00 & 35,000 \
\text { Product B } & 26.00 & 14.50 & 7,000 \
\text { Product C } & 18.00 & 10.50 & 14,000 \
\end{array}$ The sales mix for Products A, B, and C is
A) 62.5 percent, 12.5 percent, and 25 percent, respectively.
B) 100 percent, 20 percent, and 40 percent, respectively.
C) 100 percent, 25 percent, and 50 percent, respectively.
D) 44 percent, 33 percent, and 23 percent, respectively.

Accepted Answer

The sales mix is calculated by dividing the unit sales of each product by the total unit sales. Total unit sales = 35,000 + 7,000 + 14,000 = 56,000. Product A: 35,000/56,000 = 62.5%, Product B: 7,000/56,000 = 12.5%, Product C: 14,000/56,000 = 25%.

Question 13

A crystal goblet sells for $50 per goblet. The contribution margin per goblet is $14. Total monthly fixed costs are estimated to be $82,600. The monthly breakeven point in goblets is
A) 5,900 goblets.
B) 11,800 goblets.
C) 2,950 goblets.
D) 41,300 goblets.

Accepted Answer

Breakeven point in units = Fixed costs / Contribution margin per unit= $82,600 / $14= 5,900 goblets

Question 14

How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?
A) $4,000
B) $8,500
C) $9,000
D) $17,000

Accepted Answer

To break even, the total revenue must equal the total cost. The total cost is the sum of fixed costs and variable costs, which is expressed as:

Total Cost = (Variable Cost per unit × Number of units) + Fixed Cost

Let X be the number of units that must be sold to break even. Then, we have:

Total Revenue = Selling Price per unit × Number of units = $8.50X

Total Cost = (Variable Cost per unit × Number of units) + Fixed Cost = $4.00X + $9,000

Setting Total Revenue equal to Total Cost, we get:

$8.50X = $4.00X + $9,000

Solving for X, we have:

$4.50X = $9,000

X = $9,000 ÷ $4.50 = 2,000 units

Thus, the company must sell 2,000 units to break even. The total revenue required to sell 2,000 units is:

Total Revenue = Selling Price per unit × Number of units = $8.50 × 2,000 = $17,000

Therefore, the answer is D: $17,000.

Question 15

How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?
A) 1,000
B) 1,059
C) 2,000
D) 2,250

Accepted Answer

To find the break-even point in units, use the formula: Break-even point (units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Here, it is $9,000 / ($8.50 - $4.00) = 2,000 units.

Question 16

At production levels beyond the breakeven point,
A) fixed costs are not recovered.
B) profit is negative.
C) variable costs are zero.
D) profit is positive.

Accepted Answer

At production levels beyond the breakeven point, the company is generating more revenue than the total costs (fixed and variable costs). Therefore, profit is positive.

Question 17

Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity: $\begin{array}{lrr} 
& \begin{array}{r}
\text { Total Service } \
\text { Overhead }
\end{array} & \text { Cases Worked } \
\text { March } & \$ 22,900 & 112 \
\text { April } & 20,800 & 98 \
\text { May } & 26,400 & 138 \
\hline
\end{array}$ The formula for total service overhead costs is
A) $5,600 + $140 per case.
B) $5,600 + $40 per case.
C) $7,823 + $134.62 per case.
D) $7,080 + $140 per case.

Accepted Answer

Using the high-low method, the variable cost per case is calculated as ($26,400 - $20,800) / (138 - 98) = $140. The fixed cost is then calculated using one of the data points, for example, March: $22,900 - ($140 * 112) = $7,080. Therefore, the formula is $7,080 + $140 per case.

Question 18

The equation that will provide the breakeven point in units (SP = selling price) is
A) BE units = (SP - VC) ÷ FC per unit.
B) VC per unit + FC = SP per unit $\times$ BE units.
C) BE units = FC ÷ CM per unit.
D) SP per unit - VC per unit = FC ÷ BE units.

Accepted Answer

The equation BE units = FC ÷ CM per unit provides the breakeven point in units, where FC is the fixed cost, and CM per unit is the contribution margin per unit, which is the selling price per unit minus the variable cost per unit. This formula calculates the number of units that need to be sold to cover the fixed costs of the business.

Question 19

In a graph of cost-volume-profit analysis, the
A) total revenue line typically begins at a required minimum level.
B) slope of the total cost line is dependent on the variable cost per unit.
C) total cost line normally begins at zero.
D) sales level at which total cost and total revenue lines intersect is also equal to fixed costs.

Accepted Answer

The slope of the total cost line in a cost-volume-profit (CVP) analysis graph is determined by the variable cost per unit. This is because as production or sales volume increases, total costs increase at a rate proportional to the variable cost per unit. Fixed costs do not affect the slope since they remain constant regardless of the volume of units produced or sold.

Question 20

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in sales dollars?
A) $205,714
B) $110,000
C) $144,000
D) $173,000

Accepted Answer

The breakeven point in sales dollars is calculated by dividing the fixed costs by the contribution margin ratio. The contribution margin ratio is 30%, so the breakeven point is $33,000 / 0.30 = $110,000.

Quiz 23: Cost Behavior Analysis

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in sales dollars is

The breakeven point is the point at which

At the breakeven point, the contribution margin

The breakeven point is

Contribution margin equals sales minus

When fixed costs are $18,000 and the contribution margin per unit is $4, the breakeven point is

Using the contribution margin approach, find the breakeven point in units for Consumer Products if the selling price per unit is $12, the variable cost per unit is $6, and the fixed costs are $8,040.

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in units?

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in watches per month is

When fixed costs are $41,500, the variable cost is $12 per unit, and the product sells for $22 per unit, the breakeven point is

A crystal goblet sells for $50 per goblet. The contribution margin per goblet is $14. Total monthly fixed costs are estimated to be $82,600. The monthly breakeven point in goblets is

How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

At production levels beyond the breakeven point,

The equation that will provide the breakeven point in units (SP = selling price) is

In a graph of cost-volume-profit analysis, the

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in sales dollars?