5. (CPA adapted) The changes MOST likely to increase the breakeven point would b

ID: 2431504 • Letter: 5

Question

5. (CPA adapted) The changes MOST likely to increase the breakeven point would be to: a. increase both the fixed costs and the contribution margin b. decrease both the fixed costs and the contribution margin c. decrease the fixed costs and increase the contribution margin d. increase the fixed costs and decrease the contribution margin e. none of the above are likely to increase breakeven 6. Cool Fans sells hand held fans for S5.00. Fixed costs are S30,000 and Cool Fans plans to sell 20,000 fans this year. At what target costs (variable cost per unit) must Cool Fans acquire the fans if their total expected profit is $45,000? (round to the nearest penny) a. S0.80 b. $1.25 e. S3.50 d S1.50 7. (2 points) Supply costs at Lattea Corporation's chain of gyms are listed below: Client-Visits Supply Cost March April May June July August 11.647 11.443 11.975 12.088 11.707 11,193 11.987 11,678 11,826 $28.561 $28.395 $28,819 28,892 28,622 $28221 28.820 $28.578 $28,703 Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low method to estimate the variable and fixed components of this cost, those estimates would be closest to A. S2.44 per client-visit; $28,623 per month B. $1.33 per client-visit; S12,768 per month C $0.79 per client-visit: $19,321 per month D. S0.75 per client-visit; $19,826 per month

Explanation / Answer

increase the fixed cost and decrease the contribution margin

sales

100000

variable cost = sales-contribution

25000

contribution

75000

fixed cost

30000

Operating profit

45000

variable cost per unit = total variable cost/no of units

25000/20000

1.25

variable cost per Unit = (cost at higher level-cost at lower level)/(units at higher level -units at lower level)

(28892-28221)/(12088-11193)

0.750

Answer is D