GNBExam062.0 - GNB 12e Practice Exam Chapter 6 Print these...

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GNB 12e Practice Exam – Chapter 6 Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam. 1. The following is Shearer Corporation's contribution format income statement for last month: Sales $4,000,000 Less variable expenses 2,800,000 Contribution margin 1,200,000 Less fixed expenses 720,000 Net income $ 480,000 A total of 80,000 units were produced and sold last month. The company has no beginning or ending inventories. Part (a) What is the company’s breakeven in sales dollars? CM Ratio = Contribution margin = 1,200,000 = .30 Sales 4,000,000 Breakeven = Fixed Expenses = 720,000 = $2,400,000 CM Ratio .30 Part (b) How many units would the company have to sell to attain target profits of $600,000? Unit contribution margin = Contribution margin = 1,200,000 = $15.00 Units 80,000 Unit sales to attain target sales= (fixed expenses + target profit) = 720,000+600,000 = $88,000 Unit contribution margin $15.00 Part (c) What is the company’s margin of safety? Margin of safety= total budgeted or actual sales – breakeven sales
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GNBExam062.0 - GNB 12e Practice Exam Chapter 6 Print these...

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