8. Madison Company has provided the following information:Sales price per unit$40Variable cost per unit18Fixed costs per month$12,8004
Version 1What is the amount of sales in dollars required for Madison to break even? (Round any percentages to two decimal places and your final answer to the nearest dollar.) A) $711B) $23,273C) $582D) $12,800Answer: BExplanation: B) Required sales in dollars = (Fixed costs + Target profit) / Contributionmargin ratioContribution margin ratio = Contribution margin / Net sales revenueSales price$40Less: variable cost(18)Contribution margin$22Contribution margin ratio = ($22 / $40) × 100 = 55.00%Required sales in dollars = ($12,800 + 0) / 55.00% = $23,273Diff: 2LO: 20-3AACSB: Application of knowledgeAICPA Functional: MeasurementPE Question Type: ApplicationH2: Breakeven Point - A Variation of Target Profit 9.Joshua was a professional classical guitarist until a motorcycle accident left him disabled. After long months of therapy, he hired an experienced luthier and started a small shop to make and sell Spanish guitars. The guitars sell for $800, and the fixed monthly operating costs are as follows:Rent and utilities$600Wages and benefits to luthier2,300Other expenses479Joshua's accountant told him about contribution margin ratios, and Joshua understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. How many guitars does Joshua need to sell each month to break even? (Round your answer upto the nearest whole guitar.) Diff: 2LO: 20-3AACSB: Application of knowledgeAICPA Functional: Measurement5
Version 1PE Question Type: ApplicationH2: Breakeven Point - A Variation of Target Profit 10. Indiana Hot Tubs, Inc. reports the following information for August:Sales Revenue$650,000Variable Costs270,000Fixed Costs73,000Calculate the operating income for August using variable costing. Diff: 1LO: 21-1AACSB: Application of knowledgeAICPA Functional: MeasurementPE Question Type: ApplicationH2: Variable Costing 11. Crystal Pools, Inc. has provided the following information for the year.Units produced6,000unitsSales price$600per unitDirect materials$35per unitDirect labor$40per unitVariable manufacturing overhead$25per unitFixed manufacturing overhead$470,000per yearVariable selling and administration costs$60per unitFixed selling and administration costs$250,000per yearWhat is the unit product cost using absorption costing? Diff: 1LO: 21-1AACSB: Application of knowledgeAICPA Functional: Measurement 6
Version 1PE Question Type: ApplicationH2: Comparison of Unit Product Costs
You've reached the end of your free preview.
Want to read all 21 pages?
- Spring '14
- Managerial Accounting, AACSB, PE Question