1/ Alvarez Company\'s break-even point in units is 1,650. The sales price per un

Question

1/ Alvarez Company's break-even point in units is 1,650. The sales price per unit is $12 and variable cost per unit is $10. If the company sells 3,800 units, what will net income be?

Multiple Choice

$3,000.

$65,400

$4,300

$36,300

$7,600

2/ Gladstone Co. has expected sales of $332,000 for the upcoming month and its monthly break even sales are $307,500. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?

Multiple Choice

8%.

108%.

193%.

7%.

93%.

3/ During March, a firm expects its total sales to be $166,000, its total variable costs to be $95,600, and its total fixed costs to be $25,600. The contribution margin for March is:

Multiple Choice

$70,400.

$95,600.

$121,200.

$44,800.

$25,600.

Explanation / Answer

1) C. $4,300

Net Income = Contribution Margin * Units sold in excess of break-even units

Net Income = ($12 - $10) * (3,800 - 1,650) = $4,300

2) D. 7%

Margin of safety (in percent) = (Expected sales - Break-even sales)/Expected sales

($332,000 - $307,500) / $332,000 = 7%

3) A. $70,400

Contribution margin = $166,000 - $95,600 = $70,400

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