Question

In: Accounting

Metal Industries has monthly fixed costs totaling $90,000 and variable costs of $5 per unit. Each...

Metal Industries has monthly fixed costs totaling $90,000 and variable costs of $5 per unit. Each unit of product is sold for $20.

Assume the company expects to sell 11,850 units of product this coming month. What is the margin of safety in units?

Group of answer choices

8,850

6,600

5,850

7,350

Photos Inc. produces two different products with the following monthly data for June:

Digital

Camera

Cameras

Cases

Total

Selling price per unit

$300

$100

Variable cost per unit

$240

$ 60

Expected unit sales

28,000

7,000

35,000

Sales mix

80%

20%

100%

Fixed costs

$350,000

Assume the sales mix remains the same at all levels of sales.

How many units in total must be sold to break even for the month?

Group of answer choices

3,500

7,000

6,250

17,500

Camera Products Inc. produces two different products with the following monthly data for July:

Digital

Cameras

Tripods

Total

Selling price per unit

$300

$100

Variable cost per unit

$240

$ 60

Expected unit sales

28,000

7,000

35,000

Sales mix

80%

20%

100%

Fixed costs

$700,000

If the sales mix shifts to 85 percent cameras and 15 percent tripods, what happens to the break-even point in units?

Group of answer choices

It decreases.

It is not affected.

There is not enough information to answer this question.

It increases.

Photos Inc. produces two different products with the following monthly data for June:

Digital

Camera

Cameras

Cases

Total

Selling price per unit

$300

$100

Variable cost per unit

$240

$ 60

Expected unit sales

28,000

7,000

35,000

Sales mix

80%

20%

100%

Fixed costs

$350,000

Assume the sales mix remains the same at all levels of sales.

How many units in total must be sold to earn a monthly profit of $252,000?

Group of answer choices

6,250

4,500

17,000

10,750

Solutions

Expert Solution

1.) Break even sales in units          6,000 ( 90,000 / ( 20 - 5 )
Magin of safety units          5,850 ( 11,850 - 6,000 )
Correct answer is option 3 ( i.e. 5,850 ).
2.) Weighted contribution margin 56 ((300 - 240 ) x 80%) + ( ( 100 - 60 ) x 20%)
Breakeven sales in units          6,250 (350,000 / 56 )
Correct answer is option 3 ( i.e. 6,250 ).
3.) Break even units at 80% 20% sales mix
Weighted contribution margin 56 ((300 - 240 ) x 80%) + ( ( 100 - 60 ) x 20%)
Breakeven pont in units        12,500 (700,000 / 56 )
Break even units at 85% ,15% sales mix
Weighted contribution margin 57 ((300 - 240 ) x 85%) + ( ( 100 - 60 ) x 15%)
Breakeven pont in units        12,281 (700,000 / 57 )
The breakeven point will decrease with change in sales mix.
Correct answer is option 1 ( i.e. It decreases).
4.) Weighted contribution margin 56 ((300 - 240 ) x 80%) + ( ( 100 - 60 ) x 20%)
Breakeven pont in units        10,750 (350,000 + 252,000 ) / 56
Correct answer is option 4 ( i.e. 10,750).

ekkarill92 answered 2 years ago
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