Question

Assume that ABC Co. sells T-shirts for $20/ shirt. The marginal cost of production is $9/ shirt, and fixed costs are $1,500/ year. The tax rate is 20%. What is the new break-even point of the number of T-shirts required to be sold if sales price and fixed costs are both reduced by 15%.

Select one: a. None of the above

b. 187

c. 159

Question 2 Question text XYZ Co. intends to expand operations and enters into a 10 year lease at $500/ month. Currently, the marginal cost of production is $9/ shirt and fixed costs are $1,500/ year. The tax rate is 20%. XYZ Co. expects to sell its T-shirts for $18 and reduce its marginal costs by $2/ shirt. It also expects to earn net income of $5/ shirt. What is the required dollar sales to meet its expectations?

Select one: a. $22,500

b. $28,421

c. None of the above

Question 3 ABC Co. reported total manufacturing costs of $450,000, manufacturing overhead totaling $78,000 and direct materials used totaling $96,000. Beginning Work in Process is $350,000 and Ending Work in Process for the period is $100,000. How much is direct labour cost?

Select one: a. $276,000 b. $354,000 c. $624,000 d. None of the above

Answer 1

Q1.
Answer is c. 159
Explanation:
Revised selling price (20-15%)	17
Less: Variable cost per unit	9
Contribution margin per unit	8
Break even units:
Fixed cost	(1500-15%)	1275
Divide: CM per unit		8
Break even units:		159.375
Q2.
Answer is a. $22500
Explanation:
Selling price			18
Less: Margin cost (9-2)		7
Less: Profit per unit			5
Fixed cost per unit to be recovered	6
Total fixed cost:
Current fixed cost			1500
Add: Lease rental annual		6000
Total fixed cost:			7500
Divide: Fixed cost per unit		6
Required unit to be sold		1250
Multiply: Selling price		18
Required dollar sales revenue		22500
Q3.
Answer is a. $ 276,000
Explanation:
Total Manufacturing cost		4,50,000
Less: Direct material used		96,000
Less: Manufacturing oh applied		78,000
Direct labour cost			2,76,000