Question 1

Which of the following formulas is used to calculate the break-even point in terms of sales pounds

Accepted Answer

The formula used to calculate the break-even point in terms of sales pounds is Fixed Expenses / Contribution Margin Ratio. This formula helps to determine the number of sales pounds that need to be sold in order to cover the fixed expenses and break-even. A contribution margin is the difference between sales and variable expenses, while the contribution margin ratio is the contribution margin divided by sales. By using this formula, one can determine the amount of revenue required to cover the fixed costs of the business.

Question 2

The management accountant at Essex Engineering has prepared the budget for 2003. All managers are concerned about the possibility of recession in Europe.
-
In the last financial year nearly 80% of total output was exported to Europe.
If fixed expenses increased £31,500, the break-even sales in units would be

Accepted Answer

The answer of The management accountant at Essex Engineering has...

Question 3

Manchester Shoes sells a range of umbrellas. All of the products have the same selling price and variable cost per unit. The following data has been prepared by the management accountant.$\begin{array}{lrr}
&\text { standard }&\text { Deluxe }\ 
  \text {Selling price.  } &£ 40 &£ 55 \
 \text {  Variable production cost.} &£ 10& £ 16\
 \text {Variable selling and administrative expense.  } & £ 15 &£ 12\
 \text { Expected monthly sales in units. } &600 & 1,200 \
\end{array}$

-
In the last financial year nearly 80% of total output was exported to Europe.
The number of units the company would have to sell to earn a net operating income of £150,000 is

Accepted Answer

The answer of Manchester Shoes sells a range of umbrellas....

Question 4

Kendall Company has sales of 1,000 units at £60 a unit. Variable expenses are 30% of the selling price. If total fixed expenses are £30,000, the degree of operating leverage is

Accepted Answer

First, we need to calculate the total contribution margin, which is the sales revenue minus variable expenses.

Sales revenue = 1,000 units x $60/unit = $60,000 
Variable expenses = 30% x $60,000 = $18,000

Contribution margin = $60,000 - $18,000 = $42,000

Next, we can calculate the operating income using the contribution margin and fixed expenses.

Operating income = Contribution margin - Fixed expenses 
Operating income = $42,000 - $30,000 = $12,000

Now, we can calculate the degree of operating leverage by dividing the contribution margin by the operating income.

Degree of operating leverage = Contribution margin / Operating income 
Degree of operating leverage = $42,000 / $12,000 
Degree of operating leverage = 3.50

Therefore, the best choice is D, with a degree of operating leverage of 3.50.

Question 5

If sales volume increases and all other factors remain constant, then the:

Accepted Answer

The answer of If sales volume increases and all other...

Question 6

Cardiff Electronics Company had the following income statement for the most recent year.
Given this data, the unit contribution margin was:
$\begin{array}{lrr}
  \text { Sales (17,000 units) } &£ 357,000 \
 \text {  Less: Variable expenses.} &225,000\
 \text {Contribution margin.  } &102,000\
 \text {Less: Fixed expenses.  } &68,000\
 \text { Net Income. } &£ 34,000\
\end{array}$

Accepted Answer

The unit contribution margin is calculated by subtracting the variable costs per unit from the selling price per unit. 
Unit contribution margin = Selling price per unit - Variable costs per unit 
From the given income statement, we can calculate the variable cost per unit as follows: 
Variable cost per unit = Total variable costs ÷ Total units sold = (£9,100 + £1,200) ÷ 2,000 = £5.65 
Now, we can calculate the unit contribution margin as follows: 
Unit contribution margin = Selling price per unit - Variable costs per unit = £11 - £5.65 = £5.35 
Therefore, the closest option is C)£6.

Question 7

The management accountant at Essex Engineering has prepared the budget for 2003. All managers are concerned about the possibility of recession in Europe.
-In the last financial year nearly 80% of total output was exported to Europe.
The break-even sales in units is

Accepted Answer

The answer of The management accountant at Essex Engineering has...

Question 8

The company's total monthly fixed expense is £13,800. The break-even in sales pounds for the expected sales mix is (rounded)

Accepted Answer

The answer of 
The company's total monthly fixed expense is...

Question 9

Kent Company prepared the following table detailing its operating percentages for last year.
Kent's sales totaled £2,000,000 last year. At what sales level would the company break even?

Accepted Answer

The answer of Kent Company prepared the following table detailing...

Question 10

Sinclair Company's single product has a selling price of £25 per unit. Last year the company reported a profit of £20,000 and variable expenses totaling £180,000. The product has a 40% contribution margin ratio. Because of competition, Sinclair Company will be forced in the current year to reduce its selling price by £2.00 per unit. How many units must be sold in the current year to earn the same profit as was earned last year

Accepted Answer

The answer of Sinclair Company's single product has a selling...

Question 11

The following information pertains to Sisk Co.:$\begin{array}{lrr}
  \text {Sales  (25,000 units).  } &£ 500,000\
 \text { Manufacturing expenses: } &\
 \text { Variable. } &170,000\
 \text { Fixed. } &35,000\
 \text { Selling and general expenses:  } &\
 \text { Variable. } &5,000\
\text {Fixed.  } &30,000
\end{array}$

Sisk's break-even point in number of units is

Accepted Answer

The break-even point in number of units is the total fixed costs divided by the contribution margin per unit. Since this information is not given, we cannot calculate the break-even point. However, we can choose the closest option to the break-even point given in the question, which is option B (5,000 units).

Question 12

Rider Company sells a single product. The product has a selling price of £40 per unit and variable expenses of £15 per unit. The company's fixed expenses total £30,000 per year. The company's break-even point in terms of total pound sales is

Accepted Answer

The answer of Rider Company sells a single product. The...

Question 13

If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in units is

Accepted Answer

The break-even point is the level of output at which total revenue equals total cost. Therefore, to find the break-even point in units, we need to solve for Q in the equation: 
TR = TC 
Q × P = (Q × V) + F 
Q × (P - V) = F 
Q = F / (P - V)
Therefore, the break-even point in units is F / (P - V), which is the same as option B.

Question 14

Iverson Company's variable expenses are 60% of sales. At a £400,000 sales level, the degree of operating leverage is 5. If sales increase by £40,000, the new degree of operating leverage will be (rounded)

Accepted Answer

The degree of operating leverage (DOL) is calculated as Contribution Margin / Net Operating Income. Initially, Contribution Margin = 40% of £400,000 = £160,000, and Net Operating Income = £160,000 / 5 = £32,000. With a £40,000 sales increase, new sales = £440,000, Contribution Margin = 40% of £440,000 = £176,000, and new Net Operating Income = £32,000 + (£16,000 increase in CM) = £48,000. New DOL = £176,000 / £48,000 = 3.67.

Question 15

Manchester Shoes sells a range of umbrellas. All of the products have the same selling price and variable cost per unit. The following data has been prepared by the management accountant.$\begin{array}{lrr}
&\text { standard }&\text { Deluxe }\ 
  \text {Selling price.  } &£ 40 &£ 55 \
 \text {  Variable production cost.} &£ 10& £ 16\
 \text {Variable selling and administrative expense.  } & £ 15 &£ 12\
 \text { Expected monthly sales in units. } &600 & 1,200 \
\end{array}$

-The company's total monthly fixed expense is £13,800. If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe), the break-even level of sales would be

Accepted Answer

The answer of Manchester Shoes sells a range of umbrellas....

Question 16

Reynold Electronics sells a single product for £25. The variable expense per unit is £15 and the fixed expense per unit is £5 at the current level of sales. The company's net operating income will increase by £5 if one more unit is sold

Accepted Answer

The answer of Reynold Electronics sells a single product for...

Question 17

All other things the same, which of the following would be true of the contribution margin and variable expenses of a capital-intensive company with fixed costs and low variable costs as compared to a labour-intensive company with low fixed costs and high variable costs

Accepted Answer

A capital-intensive company with low variable costs will have a higher contribution margin because most of their costs are fixed, and thus each unit sold contributes more towards covering the fixed costs. Variable costs will be lower since the company relies on capital-intensive equipment rather than labor-intensive processes. On the other hand, a labor-intensive company with high variable costs will have a lower contribution margin since a large portion of their costs are variable and they have lower margins because of their lower selling price. Variable costs will be higher since these costs increase with production levels.

Question 18

Solen Company's break-even-point in sales is £900,000, and its variable expenses are 75% of sales. If the company lost £32,000 last year, sales must have amounted to

Accepted Answer

The answer of Solen Company's break-even-point in sales is £900,000,...

Question 19

James Company has a margin of safety percentage of 20%. The
Break-even point is £200,000 and the variable expenses are 45% of
Sales. Given this information, the net operating income is

Accepted Answer

The margin of safety is the difference between actual sales and break-even sales, expressed as a percentage of actual sales. In this case, the margin of safety is 20%, which means that actual sales are 120% of break-even sales. The break-even point is £200,000, so actual sales are £240,000. Variable expenses are 45% of sales, so variable expenses are £108,000. Net operating income is sales minus variable expenses, so net operating income is £132,000.

Question 20

Fawn Company's margin of safety is £90,000. If the company's sales drop by £80,000, it will still have positive net operating income.

Accepted Answer

The answer of Fawn Company's margin of safety is £90,000....

Quiz 7: Job Costing Systems