1) Zehms, Inc. has a contribution margin per unit of $21 and a contribution marg
ID: 2375469 • Letter: 1
Question
1) Zehms, Inc. has a contribution margin per unit of $21 and a contribution margin ratio of 60%. How much is the selling price of each unit?
A) Cannot be determined without more information
D. Companies that have higher fixed costs relative to variable costs have higher operating leverage.
3. Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 75,000 units. Warner's margin of safety ratio is
A.33%. B.25%. C.75%. D.125%
4. In 2012, Raleigh sold 1,000 units at $500 each, and earned net income of $50,000. Variable expenses were $300 per unit, and fixed expenses were $150,000. The same selling price is expected for 2013. Raleigh's variable cost per unit will rise by 10% in 2013 due to increasing material costs, so they are tentatively planning to cut fixed costs by $15,000. How many units must Raleigh sell in 2013 to maintain the same income level as 2012?
A) Cannot be determined without more information
Explanation / Answer
1) Zehms, Inc. has a contribution margin per unit of $21 and a contribution margin ratio of 60%. How much is the selling price of each unit?
B) $35
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. Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each), when the break-even point was 75,000 units. Warner's margin of safety ratio is
B.25%.
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In 2012, Raleigh sold 1,000 units at $500 each, and earned net income of $50,000. Variable expenses were $300 per unit, and fixed expenses were $150,000. The same selling price is expected for 2013. Raleigh's variable cost per unit will rise by 10% in 2013 due to increasing material costs, so they are tentatively planning to cut fixed costs by $15,000. How many units must Raleigh sell in 2013 to maintain the same income level as 2012?
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