Chapter 3 Handout Questions

Acct 5200
Chapter 3 Handout Questions
1. Sparkle Jewelry sells 500 units resulting in $10,000 of sales revenue, $4,000 of variable costs, and $1,500
of fixed costs. Calculate the variable cost per unit. (Round the final answer to the nearest cent.)
A) $12.00
B) $6.00
C) $2.00
D) $8.00
2. Pacific Company sells only one product for $12 per unit, variable production costs are $3 per unit, and
selling and administrative costs are $1.70 per unit. Fixed costs for 11,000 units are $6,000. The operating
income is ________ when 11,000 units are sold.
A) $8.45 per unit
B) $6.75 per unit
C) $7.30 per unit
D) $4.70 per unit
3. Arthur’s Plumbing reported the following:
Revenues
Variable manufacturing costs
Variable nonmanufacturing costs
Fixed manufacturing costs
Fixed nonmanufacturing costs
$4,500
$ 900
$ 810
$ 630
$ 545
Required:
a. Compute contribution margin.
b. Compute contribution margin percentage.
c. Compute gross margin.
d. Compute gross margin percentage.
e. Compute operating income.
4. Sky High sells helicopters. During the current year, 130 helicopters were sold resulting in $820,000 of
sales revenue, $250,000 of variable costs, and $345,000 of fixed costs. Breakeven point in units is ________.
A) 95 units
B) 58 units
C) 79 units
D) 55 units
5. Firebird Ltd. sells packaged birdseed for $6.00 per package. Variable product costs are $3.00 per
package. Fixed costs are $12,000 per period. How many packages must Firebird sell to earn a target
operating income of $7,900?
A) 4,000 packages
B) 2,633 packages
C) 6,633 packages
D) 3,317 packages
6. The following information is for High Corp:
Selling price
Variable costs
Total fixed costs
$60 per unit
$40 per unit
$130,000
If targeted operating income is $50,000, then targeted sales revenue is ________. (Round the final answer
to the nearest dollar.)
A) $540,000
B) $390,000
C) $150,000
D) $180,000
7. MyArt sells framed art prints for $100. The unit variable cost per phone is $50 plus a selling
commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and
administrative costs total $2,500.
Required:
a. What is the contribution margin per print?
b. What is the breakeven point in prints?
c. How many prints must be sold to earn pretax income of $7,500?
8. The Holiday Card Company, a producer of specialty cards, has asked you to complete several
calculations based upon the following information:
Income tax rate
Selling price per unit
Variable cost per unit
Total fixed costs
30%
$6.60
$5.28
$46,200.00
Required:
a. What is the breakeven point in cards?
b. What sales volume is needed to earn an after-tax net income of $13,028.40?
c. How many cards must be sold to earn an after-tax net income of $18,480?
9. The following information is for Alex Corp:
Product X: Revenue
Variable Cost
$12.00
$4.50
Product Y: Revenue
Variable Cost
$44.50
$9.50
Total fixed costs
$75,000
What is the breakeven point assuming the sales mix consists of two units of Product X and one unit of
Product Y?
A) 842.5 units of Y and 1,685 units of X
B) 3,000 units of Y and 1,500 units of X
C) 1 units of Y and 10,000 units of X
D) 1,500 units of Y and 3,000 units of X
10. The following information is for Alex Corp:
Product X: Revenue
Variable Cost
$12.00
$4.50
Product Y: Revenue
Variable Cost
$25.00
$10.00
Total fixed costs
$40,500
What is the operating income, assuming actual sales total 120,000 units, and the sales mix is two units of
Product X and one unit of Product Y?
A) 1,159,500
B) 1,200,000
C) 1,960,000
D) 1,240,500