Question

Derst Incorporated sells a particular textbook for $26. Variable expenses are $19 per book. At the current volume of 53,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

Multiple Choice

• $1,378,000

• $1,749,000

• $371,000

• $1,007,000

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Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $47,700 for Division A. Division B had a contribution margin ratio of 35% and its sales were $231,000. Net operating income for the company was $27,200 and traceable fixed expenses were $59,700. Corbel Corporation's common fixed expenses were:

Multiple Choice

• $101,350

• $128,550

• $41,650

• $59,700

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Mio Canoe Livery rents canoes and transports canoes and customers to and from their canoe trip on a local river. The trip is priced at $20 per person and has a CM ratio of 30%. Mio's fixed expenses are $84,000. Last year, sales were $400,000 and profit was $36,000. How many units need to be sold to break-even, and how many need to be sold to earn a profit of $42,000?

Multiple Choice

• 1,800 and 2,100

• 6,000 and 8,143

• 4,200 and 6,300

• 14,000 and 21,000

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Dake Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$ 7.15
Direct labor	$ 3.40
Variable manufacturing overhead	$ 1.95
Fixed manufacturing overhead	$ 3.20
Fixed selling expense	$ 0.85
Fixed administrative expense	$ 0.55
Sales commissions	$ 0.65
Variable administrative expense	$ 0.55

If 5,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:Multiple Choice

• $28,950

• $9,750

• $25,750

• $19,200

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Question 22 of 40 Total22 of 40

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Corporation X sold 25,000 units of product last year. The contribution margin per unit was $2, and fixed expenses totaled $40,000 for the year. This year fixed expenses are expected to increase to $45,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same net operating income as was earned last year?

Multiple Choice

• 2,500

• 27,500

• 35,000

• 22,500

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At an activity level of 8,500 machine-hours in a month, Falks Corporation’s total variable production engineering cost is $748,850 and its total fixed production engineering cost is $177,760. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 8,800 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

Multiple Choice

• $108.30

• $105.65

• $109.01

• $105.30

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Answer 1

1..

At break even , there is no profit or loss. In other words , contribution is equal to fixed costs.

Contribution = units * (selling price - variable expense)

= 53000 * ($26 - $19)

= $371000
Option 3 is correct

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2...

Division B contribution margin = sales * contribution margin ratio

= 231,000 * .35

= $ 80,850

Total contribution from both division = 47,700 + 80,850

= $ 128,550

Total fixed cost = Total ontribution margin - net income

= 128,550 - 27,200

= 101,350

Common fixed cost = Total fixed cost - Traaceable fixed cost

= 101,350 - 59,700

= $ 41,650
Option 3 is correct

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3.....

Contribution Margin Per Unit = Sales Per Unit * Contribution Margin Ratio

= $ 20 * 30%

= $ 6

Required Profit = $ 42,000

Add: Fixed Cost = $ 84,000

Required Contribution Margin = $ 126,000

Break Even Units = Fixed Cost / Contribution Margin Per Unit

= $ 84,000 / $ 6

= 14,000

Units to be sold to earn the profit = $ 126,000 / $ 6

= 21,000 Units

Option 4 is correct