Mtg Acctg - Chapter 4 review question PDF

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Applied the formula of chapter 4 to the exercise s...

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Management Accounting – Chapter 4 Review Questions

1. The following monthly data are available for the Acme Company:

Sales Variable expenses Contribution margin Fixed expenses

Product A $150,000 91,000

Product B $130,000 104,000

Product C $90,000 27,000

Total $370,000 222,000

$59,000

$26,000

$63,000

148,000 55,000 $93,000

What are the break-even sales for the month for the company? A. $91,667. B. $203,000. C. $148,000. D. $137,500. Explanation: 55000/(148000/370000)=137500 2. Selling price Variable production cost Fixed production cost Variable selling & administrative expenses Fixed selling & administrative expenses

$20 per unit $12 per unit $3,000 $3 per unit $1,500

What is the break-even point in dollars? A. $18,000. B. $6,000. C. $11,250. D. $7,500. Explanation: CM unit = 20-(12+3)= $5/ per unit. CM ratio= 5/20=0.25 break-even point in dollars= (3000+1500)/0.25= 18000 3. The following is last month's contribution format income statement:

Sales (10,000 units) Less: variable expenses Contribution margin Less: fixed expenses Operating income

$1,200,000 800,000 400,000 240,000 $160,000

What is the company's break-even sales in units? A. 0 units. B. 12,000 units. C. 6,000 units. D. 8,000 units. Explanation: Unit CM= 1,200,000/10,000- 800,000/10,000= $40/ per unit break-even sales in units= 240,000/40=6000 4. The following is last month's contribution format income statement (Do not round intermediate computations):

Sales (20,000 units) Less: variable expenses Contribution margin Less: fixed expenses Operating income

$1,800,000 1,200,000 600,000 400,000 $200,000

What is the company's break-even in sales dollars? A. $1,200,000. B. $0. C. $1,800,000. D. $1,600,000. Explanation: CM ratio= 600,000/1,800,000=0.33333333 break-even in sales dollars= 400,000/0.333333= 1,200,000 5. Ontario Company sells a single product at a selling price of $55 per unit. Variable costs are $30.25 per unit, and fixed costs are $113,850. What is Roberts Company's break-even point?

A. $207,000. B. 3,764 units. C. $253,000. D. 2,070 units. Explanation: CM unit= 55-30.25=$ 24.75 per unit. CM ratio= 24.75/55=0.45 break-even point= 113,850/ 0.45=253,000 6. A product sells for $20 per unit, and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. The company that makes and sells the product has an income tax rate of 40%. How many units must be sold to yield an after-tax operating profit of $30,000?

A. 21,250 units. B. 18,750 units. C. 24,375 units. D. 14,167 units. Explanation: Profit before tax= 30,000/(1-0.4)= 50,000 CM unit= CM ratio* Sale per unit= 40%*20=8 Unit sold to attaint the target profit= (120,000+50,000)/ 8= 21250

The following is Allison Corporation's contribution format income statement for last month: Sales Less: variable expenses Contribution margin Less: fixed expenses Operating income

$800,000 300,000 500,000 400,000 $100,000

The company has no beginning or ending inventories. The company produced and sold 10,000 units last month.

7. What is the company's contribution margin ratio? A. 62.5%. B. 160%. C. 500%. D. 20%. Explanation: contribution margin ratio= 500,000/800,000=62.5%

8. What is the company's break-even sales in dollars? A. $0. B. $640,000. C. $700,000. D. $400,000. Explanation: break-even sales in dollars= 400,000/62.5%=640,000

9. If sales increase by 200 units, by how much should before-tax profits increase? A. $16,000. B. $5,000. C. $2,000. D. $10,000. Explanation: profit for each unit= 500,000/10,000= $50/per unit. If increase by 200 units, profit before tax= 50*200=10,000 10. How many units would the company have to sell to attain after-tax profits of $72,000, assuming it is subject to a 40% income tax rate? A. 9,440 units. B. 11,600 units. C. 10,400 units. D. 12,000 units. Explanation: profit before tax= 72,000/(1-0.4)=120,000 CM per unit= 500,000/10,000= $50/ per unit Unit sold to attain the target profit= (400,000+120,000)/50=10,400 11. What is the company's margin of safety percentage? A. 25%. B. 20%. C. 40%. D. 10%. Explanation: Margin of safety in dollars= 800,000-640,000=160,000 margin of safety percentage= margin of safety in $/ total sales= 160,000/ 800,000=20%...