Marketing Final Exam

Highlights of his ten years with his wife kathy

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Unformatted text preview: cial moments. For example, on his wedding anniversary, David had an art print produced that celebrated highlights of his ten years with his wife, Kathy. Suppose that Your Memory Lane sells the custom artwork for $500. It estimates its average variable costs to be $200 per unit produced. It figures its fixed costs to be $900,000 per year. How many prints does it have to sell to break even? a. 2,000 prints b. 1,200 prints c. 3,000 prints d. 2,500 prints e. 6,000 prints ANS: C Break-even quantity equals the total fixed costs ($900,000) divided by the fixed cost contribution per unit ($500 – $200 = $300). PTS: 1 REF: 312 KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Analytic MSC: BLOOMS Analysis 86. Furr Friends sells kits for making personalized grave markers for pets. The company sells each kit for $25. The average variable cost for each kit is $10, and the total annual fixed costs for plant operation are $45,000. What is the break-even point in units? a. 1,800 b. 2,500 c. 3,000 d. 4,500 e. 5,000 ANS: C Break-even quantity equals the total fixed costs ($45,000) divided by the fixed cost contribution per unit ($25 – $10 = $15). PTS: 1 REF: 312 KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Analytic MSC: BLOOMS Analysis 87. Regency, Inc. makes disposable cap and gown sets for graduations. Each cap and gown set sells for $15. The average variable cost for manufacturing ten cap and gown sets is $100. Total fixed costs for the year equal $65,000. Calculate the break-even point in units. a. 650 b. 765 c. 1,300 d. 4,334 e. 13,000 ANS: E Break-even point = $65,000 ÷ [15 – (100 ÷ 10)] = 13,000 PTS: 1 REF: 312 KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Analytic MSC: BLOOMS Analysis 88. Ceylon Express sells bottled pasteurized tea to retailers. It has the following revenues and costs: Sales price per bottle: $0.50 Average variable costs per bottle: $0.30 Total fixed costs (annual): $50,000.00 Tax rate: 20 percent What is the annual break-even point in units for the company? a. 50,000 b. 250,000 c. 100,000 d. 166,667 e. 500,000 ANS: B Break-even quantity is the total fixed costs ($50,000.00) divided by fixed cost contribution per unit ($0.20). PTS: 1 REF: 312 KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Analytic MSC: BLOOMS Analysis 89. Chulo Ibsen makes and sells hand-forged wrought iron fire screens for $125 each. He has determined that his fixed costs are $8,000, and his average variable costs per fire screen are $45. What is his break-even point in dollars? a. $22,550 b. $12,500 c. $10,000 d. $8,000 e. $5,875 ANS: B [$8,000 ÷ ($125 – $45)] x $125 = $12,500 PTS: 1 REF: 312 KEY: CB&E Model Pricing OBJ: 19-5 TOP: AACSB Analytic MSC: BLOOMS Analysis 90. Which of the following statements describes a limitation associated with break-even analysis? a. It is sometimes difficult to ascertain whether a cost is fixed or variable. b. It requires the calculation of marginal revenue. c. It strictly considers demand. d. It assumes variable cost per item...
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This document was uploaded on 09/29/2013.

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