Key to Quiz _4 3-25-2010

Managerial Accounting: Creating Value in a Dynamic Business Environment

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3/25/2010 Spring 2010 Quiz #4 Name: KEY (20 points) Ch 7 Cost Volume Profit Analysis Indicate whether each of the following statements is True (T) or False (F) (7 points) 1. Gross margin per unit is equal to the selling price per unit minus the variable cost per unit False 2. A key assumption in Cost volume Profit analysis is that total costs are either fixed or variable True 3. At the breakeven point, total contribution margin is equal to total fixed cost. True 4. Operating leverage factor = Net income / Contribution margin False 5. Sales margin is the amount by which budgeted sales exceed breakeven sales volume. True 6. A decrease in variable cost per unit results in an increase in the contribution margin per unit which will increase breakeven sales volume False 7. $ Increase in net income = Increase in sales volume beyond breakeven * cm per unit True Part B ( #1-#5, 8 points) You are considering starting a business selling roller blades. You expect to charge a price of $100 per pair. You can purchase roller blades from a manufacturer in china for $30per pair. Transportation to the United States costs $5 per pair. Administration costs of operating are $1,125,000 and don’t vary with the number of roller blades purchased or sold. 1. How many pairs of roller blades must be purchased and sold to make $110,000 in profit (before taxes) (1,125,000+110,000) / (100-35) =19,000 (2 points) 2. How many roller blades must be purchased and sold in order to breakeven? 1
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Key to Quiz _4 3-25-2010 - ACC 312 Name Spring 2010 KEY(20...

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