Stites Corporation will make $100,000 if it sells 8,000 bathtubs for $200 per un
ID: 2564499 • Letter: S
Question
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?
$480,000
$380,000
$1,020,000
$580,000
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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?
139 days
155 days
100 days
125 days
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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
Sales revenue (750 units at $20)
$15,000
Manufacturing cost of goods sold:
Direct materials used
$2,250
Direct labor
2,100
Variable manufacturing overhead
2,650
Fixed manufacturing overhead
750
7,750
Gross margin
$ 7,250
Selling expenses:
Variable costs
$1,100
Fixed costs
950
Administrative expenses:
Variable costs
900
Fixed costs
620
Total selling and administrative expenses
3,570
Operating income
$ 3,680
Refer to Exhibit 21-5. How many units of its product will Duncan Corporation have to sell to break even?
116
300
290
194
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Refer to Exhibit 21-5. What will be Duncan Corporation's operating income if sales volume increases by 40 percent?
$6,080
$7,280
$6,800
$2,400
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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
$0.50
$0
$1.50
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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
$8,100
Not enough information available
$10,100
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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:
50 units
20 units
25 units
15 units
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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?
$12,800
$25,000
$45,000
$30,000
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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?
112
250
286
200
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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
$480,000
$380,000
$1,020,000
$580,000
Explanation / Answer
Answer to Question 1.
Contribution Margin Ratio= Contribution Margin / Sales * 100
Sales = 8,000 * $200 = $1,600,000
30 = Contribution Margin / 1,600,000 * 100
Contribution Margin = $480,000
Net Income = Contribution Margin- Fixed Cost
$100,000 = $480,000 – Fixed Cost
Fixed Cost = $380,000
Answer to Question 2.
Break Even Point (in units) = Fixed Cost / Contribution Margin per unit
Break Even Point (in units) = 67,500 / 30
Break Even Point (in units) = 2,250 units
Days to Break Even Units = 2,250 / 18
Days to Break Even Units = 125 days
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