Question

Assume the following (1) selling price per unit = $30. (2) variable expense per unit = $18, and (3) total fixed expenses = $33,900. Given these three assumptions, the unit sales needed to break-even is: Multiple Choice 36,400 units. 5,325 units 35,325 units. 2,825 units

Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $300,000 120,000 180,000 111,000 $ 69,000 Per Unit $ 40 16 $24 If the variable expenses increase by $1 per unit, the advertising expenditures increase by $15,000, and unit sales increase by 5%, then the best of estimate of the new net operating income is: Multiple Choice $55,125 $69,375 $46,725 $39.600

Amount $300,000 120,000 180,000 61,000 $119,000 Per Unit $40 16 $24 Sales Variable expenses Contribution margin Fixed expenses Net operating income If the selling price per unit increases by 10% and unit sales drop by 5%, then the best of estimate of the new net operating income is: Multiple Choice $138,500 $148,200 $127,200 $132,400

Answer 1

1.

 

Break even sales in units = Fixed expenses / Contribution margin

Break even sales in units = $33,900 / ($30-$18)

Break even sales in units = 2,825 Units

Answer is D. 2,825 Units

 

2.

 

Sales ($300,000*105%) $ 315,000

Less: Variable expenses ($120,000/$16)*105%*$17) $ 133,875

Less: Fixed expenses ($111,000+$15,000) $ 126,000

Net operating income $ 55,125

Answer is A. $55,125

 

3.

 

Sales ($300,000/$40)*95%*$44) $ 313,500

Less: Variable expenses ($120,000*95%) $ 114,000

Less: Fixed expenses $ 61,000

Net operating income $ 138,500

Answer is A. $138,500

Break even sales in units = 2,825 Units