Question

1-

Swansong plans to sell 10,000 units of a particular product during July, and expects sales to increase at the rate of 10% per month during the remainder of the year. The June 30 and September 30 ending inventories are anticipated to be 950 units and 1,100 units, respectively. On the basis of this information, how many units should Swansong purchase for the quarter ended September 30?

Select one:

a. 32,950 units

b. 33,250 units

c. 31,850 units

d. 34,750 units

2-

Grey, Inc. sells a single product for OMR 20. Variable costs are OMR 8 per unit and fixed costs total OMR 240,000 at a volume level of 5,000 units. Assuming that fixed costs do not change, Green's break-even sales would be:

Select one:

a. OMR 120,000

b. OMR 400,000

c. OMR 20,000

d. OMR 48,000

Answer 1

1)

Expected Sales:	Computation	Amount
July		10,000 units
August	Previous Month Sales + 10% of Previous Month Sales = 10,000 units + 10% of 10,000 units	11,000 units
September	Previous Month Sales + 10% of Previous Month Sales = 11,000 units + 10% of 11,000 units	12,100 units
Total Expected Sales for the Quarter	Total of the Above = (10,000 + 11,000 + 12,100) units	33,100 units
Inventory as on June 30		950 units
Inventory as on September 30		1,100 units
Units to be purchased	Inventory as on June 30 + Total Expected Sales for the Quarter - Inventory as on September 30 = 950 units + 33,100 units – 1,100 units	32,950 units

Option A is the correct answer = 32,950 units

2)

Contribution Margin per Unit= Selling Price per Unit – Variable Costs per Unit

= OMR 20 – OMR 8

= OMR 12

Contribution Margin Ratio = Contribution Margin per Unit / Selling Price per Unit

= OMR 12 / OMR 20

= 0.60 or 60%

Breakeven Sales = Fixed Costs / Contribution Margin Ratio

= OMR 240,000 / 60%

= OMR 400,000

Option B is the correct answer = OMR 400,000