Question

Our company sells a product for $150 per unit. Variable costs are $90 per unit and fixed costs are $18,000. The company expects to sell 800 units this year. How many units must we sell to break even?

a) 300

b) 320

c) 360

d) 400

Our company has reviewed the utilities bills for our company. We have determined that the highest and lowest bills were $5,600 and $3,200 for the months of January and September. If we produced 1,200 and 600 units in these months, what was the variable cost per unit associated with the utilities bill?

a) $4.67

b) $5.33

c) $4.00

d) $5.00

Our company sells its product for $60 per unit and has a variable cost of $30 per unit. Total fixed costs equal $20,000. What would be the breakeven point in units if variable cost increased by $10?

a) 500

b) 667

c) 1,000

d) 1,200

Our company sells its product for $100 per unit and has a variable cost of $40 per unit. Total fixed costs equal $18,000. The breakeven in units is 300,and we expect to sell 250 units. What is the margin of safety in dollars?

a) ($3,000)

b) $3,000

c) ($5,000)

d) $5,000

Answer 1

Problem - 1

Option - A

variable cost per unit = 90

Contribution per unit = sale price – variable cost

                                      = 150-90

                                       = 60 $ Per unit

breakeven in units

=    fixed cost / contribution per unit

= 18000 / 60

= 300 units

Problem-2

Option - C

under high-low cost method

variable cost per unit =

( highest activity cost - lowest activity cost ) / ( highest activity units – lowest activity units )

= (5600-3200) / (1200-600)

= 2400 / 600

= $ 4 per unit

Problem- 3

Option - C

new vwariable cost per unit = 30+10

= 40 per unit

selling price per unit= 60

variable cost per unit = 40

Fixed cost = 20000 $

Contribution per unit = sale price – variable cost

                                      = 60 -40

                                       = 20 $ Per unit

breakeven in units

in units =    fixed cost / contribution per unit

= 20000 / 20

= 1000 units

Problem- 4

Option - C

sales price = 100 $ per unit

break even units = 300

Break even sales in dollars = 300 * 100 = $ 30000

Actual sales units = 250 units

Actual sales in doolars = 250 *100 = $ 25000

margin of saftey sales in doolars

= Actual sales - breakeven sales

= (250*100) - (300*100)

= 25000 - 30000

= (5000)