Reference no: EM132500742
Problem 1: Oil Corporation has the following financial perspective of profitability for the current month:
Revenues $10,000
Cost of Goods Sold
Direct Materials (Variable) $1,000
Direct Labor (Variable) $1,000
Variable Overhead $500
Fixed Overhead $1,500
Gross Margin $6,000
Variable Operating Expenses $1,000
Fixed Operating Expenses $3,000
Profit $2,000
Letty, a manager at Oil Corp., has decided to adopt a managerial perspective of profitability.
Using the provided information, which of the following statements are true about the managerial perspective? (Check all that apply.)
- Total variable costs will be $3,500.
- Contribution margin will be $6,500.
- Profit will be $2,000.
- Gross margin will be $6,500.
Problem 2: Jonas Company has the following information related to its manufacturing and selling of decorative vases.
Current selling price, per unit $8.00
Direct materials, per unit $3.00
Direct labor, per unit $1.50
Variable manufacturing overhead, per unit $1.00
Variable operating expense $1.25
Fixed manufacturing overhead $750,000
Fixed operating expenses $400,000
What are the variable costs and fixed costs that Jonas will use to calculate the break-even point?
- $1.25 (Variable) and $400,000 (Fixed)
- $5.50 (Variable) and $750,000 (Fixed)
- $6.75 (Variable) and $1,150,000 (Fixed)
- $6.75 (Variable) and $750,000 (Fixed)
Problem 3: James Company has the following information related to its manufacturing and selling of staplers.
Current selling price, per unit $6.00
Direct materials, per unit $2.00
Direct labor, per unit $1.00
Variable manufacturing overhead, per unit $1.00
Variable operating expense $1.00
Fixed manufacturing overhead $20,000
Fixed operating expenses $5,000
What is the James Company's break-even point for staplers?
- 25,000 staplers
- 12,500 staplers
- 50,000 staplers
- 10,000 staplers
Problem 4: Beloit Corporation has the following information related to its manufacturing and selling of computer back-up hard drives.
Current selling price, per unit $80.00
Direct materials, per unit $15.00
Direct labor, per unit $5.00
Variable manufacturing overhead, per unit $10.00
Fixed manufacturing overhead $200,000
Fixed operating expenses $50,000
- Analysts compute the break-even point using the above information, and conclude that production capacity and estimated sales can reach that point.
- However, a few days later, the analyst learns that the selling price will decrease by 5%.
What is the effect on the original break-even point of this change?
- An increase of 370 drives
- A decrease of 370 drives
- A decrease of 435 drives
- An increase of 5%
- An increase of 435 drives
Problem 5: James Company has the following information related to its manufacturing and selling of staplers.
Current selling price, per unit $6.00
Direct materials, per unit $2.00
Direct labor, per unit $1.00
Variable manufacturing overhead, per unit $1.00
Variable operating expense $1.00
Fixed manufacturing overhead $20,000
Fixed operating expenses $5,000
Which of the following are true regarding the assumptions of James Company's cost-volume-profit analysis? (Check all that apply.)
- Fixed manufacturing overhead of $20,000 is sufficient to achieve the break-even volume.
- If variable costs change, direct labor costs will be half of direct materials costs.
- Demand will be sufficient to warrant an average price of $6 per unit.
- James Company offers discounts to the $6 selling price if the break-even point exceeds demand.
Problem 6: Ryan Corporation has the following information relating to its manufacturing and selling of cakes:
Average current selling price: $14.00
Average variable cost of cakes: $6.00
Fixed yearly costs: $240,000
The income tax rate is 35%
If Ryan Corporation wanted to make a net income after tax of $100,000, how many cakes would they have to produce and sell?
- 49,231 cakes
- 45,333 cakes
- 54,443 cakes
- 57,300 cakes
Problem 7: Garrett Company has the following information relating to its two products, product Red and product Blue.
Selling Price Variable Cost Fixed Cost
Red $14 $6 $16,000
Blue $15 $5 $10,000
If Garrett Company viewed its products in aggregate, what would the break-even point be if managers projected a 60% - 40% sales mix for Red and Blue, respectively? How about a 40% - 60% sales mix for Red and Blue, respectively?
- 2,444 units; 2,210 units (rounded)
- 2,667 units; 2,451 units (rounded)
- 3,000 units; 2,987 units (rounded)
- 2,955 units; 2,826 units (rounded)
Problem 8: Garrett Company has the following information relating to its two products, product Red and product Blue.
Selling Price Variable Cost Fixed Cost
Red $14 $6 $16,000
Blue $15 $5 $10,000
Assuming Garrett Company views each product separately, what is the breakeven point for Red? For Blue?
- 1,500 units; 1,000 units
- 2,000 units; 1,000 units
- 2,500 units; 2,000 units
- 3,000 units; 2,000 units