Response to the following multiple choice questions:
1. Stites Corporation will make $100,000 if it sells 8,000 bathtubs for $200 per unit. If the contribution margin is 30%, what will the fixed costs be?
• $1,020,000
• $580,000
• $480,000
• $380,000
2. A firm's per-unit contribution margin is $30, its fixed costs are $67,500, and its daily production output is 18 units. How many days will it take to break even after it is in operation?
• 100 days
• 139 days
• 155 days
• 125 days
• Exhibit 21-5
The following is a partial income statement for Duncan Corporation for 2011:
Duncan Corporation
Projected Income Statement
For the Year Ended December 31, 2011
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Sales revenue (750 units at $20)
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$15,000
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Manufacturing cost of goods sold:
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Direct materials used
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$2,250
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Direct labor
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2,100
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Variable manufacturing overhead
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2,650
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|
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Fixed manufacturing overhead
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750
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7,750
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Gross margin
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$ 7,250
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Selling expenses:
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Variable costs
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$1,100
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|
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Fixed costs
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950
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Administrative expenses:
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Variable costs
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900
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|
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Fixed costs
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620
|
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Total selling and administrative expenses
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3,570
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Operating income
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$ 3,680
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3. Refer to Exhibit 21-5. How many units of its product will Duncan Corporation have to sell to break even?
• 116
• 194
• 300
• 290
4. Refer to Exhibit 21-5. What will be Duncan Corporation's operating income if sales volume increases by 40 percent?
• $2,400
• $6,800
• $6,080
• $7,280
5. At a break-even point of 600 units sold, the variable costs were $600 and the fixed costs were $300. What will the sale of each additional unit contribute to profit before income taxes?
• $1.00
• $0
• $0.50
• $1.50
6. Collins Co. earned a profit of $2,000 in January. The company has estimated that sales will increase by $13,500 in February. Assume that fixed costs for January were $3,000 (and are not expected to change) and the variable cost ratio is 40%. What is the expected profit for the next month?
• $13,500
• Not enough information available
• $8,100
• $10,100
7. After the break-even point is reached, a firm that has a per-unit contribution margin of $20 will have a $500 increase in profits when sales increase by:
• 20 units
• 50 units
• 15 units
• 25 units
8. Stanley Company manufactures and sells one product for $200 per unit. The variable costs per unit are $140, and monthly total fixed costs are $7,500. Last month Stanley sold 100 units and expects sales to remain the same for the current month. If fixed costs increase by $1,500, what is the break-even point for the current month?
• $25,000
• $45,000
• $30,000
• $12,800
9. Everclean Company cleans draperies. It charges $90 to clean a full-size drape, and its variable and fixed costs are $55 per drape and $10,000 per year, respectively. Given these data, if Everclean's variable costs were reduced to $50 per drape, how many drapes would the firm have to clean to break even?
• 200
• 286
• 250
• 112
10. Everclean Company cleans draperies. It charges $90 to clean a full-size drape, and its variable and fixed costs are $55 per drape and $10,000 per year, respectively. Given these data, if Everclean's fixed costs increased to $15,000, how many drapes must the firm clean to earn $60,000?
• 429
• 2,143
• 2,000
• 1,364