ACCT 505 week 3 quiz with answers - Week 3 Quiz Transcript...

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Week 3 Quiz Transcript Week 3 Quiz Transcript Print TITLE Week 3 Quiz SECTION Cost-Volume-Profit QUESTION 1 Contribution Margin A1 Contribution Margin The owner of Monroe Basketballs Inc., Bill Monroe, has asked you, a consultant, to determine what amount of 2007's revenues went towards covering fixed costs and generating profits. You determine that contribution margin is what he is looking for. Monroe Basketballs' 2007 income statement is provided below. Monroe Basketballs Inc. Income Statement 12/31/2007 (all values in $000s) Revenue $150,000 Costs: Factory Depreciation and Maintenance $40,000 Rubber, thread, and so on $41,000 Employee Wages $38,000 Net Income $31,000 ANSWER 1 Revenue = $150,000 Variable Costs (rubber, thread, and so on) = $41,000 Employee Wages $38,000 Total Variable Costs $79,000 Contribution Margin = Revenue - Total Variable Costs Contribution Margin = $150,000 - $79,000 = $71,000 QUESTION 2 Contribution Margin Ratio The CEO of Pink Lady Designers Inc. has asked the CFO for the percentage of revenue that goes towards covering fixed costs and creating profits. You, as an analyst, have been tasked with 1
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Week 3 Quiz Transcript determining this information. The CEO is essentially asking for the contribution margin ratio. The 2007 income statement is provided below. Calculate Pink Lady Designers Inc.'s contribution margin ratio for 2007. Please round your answer to two decimal places. Pink Lady Designers Inc. Income Statement 12/31/2007 (all values in $000s) Revenue $400,000 Costs: Fabric and Other Materials $140,000 Employee Wages $105,000 Factory Depreciation $70,000 CEO, CFO, COO Salaries $30,000 Net Income $55,000 ANSWER 2 Revenue = $400,000 Variable Costs = Fabric and other materials = $140,000 Employees Wages = $105,000 Total Variable Costs = $245,000 Contribution Margin = $400,000 - $245,000 = $155,000 Contribution Margin Ratio = Contribution Margin / Sales CM Ratio = $155,000 / $400,000 = 0.39 QUESTION 3 Break-Even (Units) PrintMed produces ink-jet printers. The printers will print on paper as well as specialized plastic sheets used for medical research. Below is the information for PrintMed's March production activities. PrintMed March Production Activity Direct Materials $67 per unit Direct Labor $15 per unit Variable Overhead $5 per unit Fixed Overhead $20,000 per month 2
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Week 3 Quiz Transcript Variable Selling $3 per unit sold Fixed general and administrative $35,000 per month Units produced 6,000 per month Units in beginning finished goods 0 Units sold 5,500 Selling price $200 per unit PrintMed's CFO has asked you, the new accountant, to determine the number of units PrintMed needs to sell each month to Break-Even. The CFO is concerned that the sales team is not working hard enough to sell units. Calculate the break-even point in units.
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