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Unformatted text preview: Chapter 3 Out of 25 questions, you answered 18 correctly, for a final grade of 72%. 18 correct (72%) 5 incorrect (20%) 2 unanswered (8%) Your Results: The correct answer for each question is indicated by a . 1 CORRECT Baker Company uses a costplus pricing strategy to set the price of its product. Its product cost is $30 per unit. If Baker sets its price at cost plus a markup equal to 40% of cost, what will be its profit on the sale of one unit of product? A) $12 B) $18 C) $30 D) $42 Feedback: The selling price will be $42 {$30 + (0.40 x $30)}. The profit will be the selling price minus the cost per unit ($42  $30). LO 1 2 CORRECT The breakeven point is where: A) variable costs equal fixed costs. B) revenue equals total costs. C) revenue equals contribution margin. D) contribution margin equals total costs. Feedback: The breakeven point is the point where total revenue equals total costs. LO 2 3 CORRECT Jackson Company produces chairs, which sell for $95 per unit. The chairs have variable costs of $55 per unit, and the company has $230,000 of fixed costs. If the company produces and sells 8,000 units, what is its breakeven point in units? A) 2,421 units B) 2,875 units C) 4,182 units D) 5,750 units Feedback: Breakeven point in units = fixed costs/contribution margin per unit Breakeven point in units = $230,000/ ($95  $55) LO 2 4 CORRECT Martin Company produces a product that has a selling price of $14. The product has a variable cost of $8 per unit, and the companys fixed costs are $44,000. How many units must the company sell in order to attain a profit of $25,000? A) $5,500 B) $7,333 C) $8,625 D) $11,500 Feedback: Sales volume in units = (fixed costs + desired profit)/unit contribution margin Sales volume in units = ($44,000 + $25,000)/($14  $8) LO 3 5 CORRECT The margin of safety measures: A) the amount available to cover fixed costs and provide for profit. B) the point at which total revenue equals total costs. C) the amount by which actual sales can fall short of budgeted sales before the company will incur a loss. D) the cost of lost opportunities. Feedback: The margin of safety measures the cushion between budgeted sales and breakeven sales. LO 7 Use the following information to answer questions 6  12. Smith Merchandising has the following cost information: Material cost per unit $24 Transportationin (per case of 100 units) $300 Advertising $50,000 Rent $20,000 Salaries $80,000 6 CORRECT What is the products selling price?...
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This note was uploaded on 04/17/2008 for the course ACCT 102 taught by Professor ? during the Summer '06 term at Hofstra University.
 Summer '06
 ?
 Accounting

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