Question

Accounting CVP questions:

please answer it, and explain it to me in a simple way, with the steps of how you did it.

thanks.

At the break-even point of 2,000 units, variable costs are $120,000, and fixed costs are $64,000. How much is the selling price per unit?

a.   $92

b.   $32

c.   $28

d.   Not enough information

Fixed costs are $2,400,000 and the contribution margin per unit is $120. What is the break-even point?

a.   $2,000,000

b.   $20,000,000

c.   2,000 units

d.   20,000 units

Surrie Company produces flash drives for computers, which it sells for $20 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Surrie Company?

a.   $200

b.   $4,000

c.   $14,000

d.   $8,400

Tiny Tots Toys has actual sales of $400,000 and a break-even point of $275,000. How much is its margin of safety ratio?

a.   31.25%

b.   68.75%

c.   145.45%

d.   45.45%

Answer 1

1)

Break-even point = 2000 units

Variable cost = 120000

Fixed cost = 64000

Total cost = Variable cost + Fixed cost = 120000 + 64000 = 184000

Selling price per unit = Total cost/Break-even point in units = 184000/2000 = 92

Answer is a.   $92

2)

Break-even point = Fixed cost/Contribution per unit

= 2400000/120 = 20000 units

Answer is d.   20,000 units

3)

Sale price = 20 per unit

Variable cost = 13 per unit

Contribution per unit = 20 - 13 = 7

Fixed cost for April = 1400

Break- even point in units = Fixed cost/Contribution per unit = 1400/7 = 200 units

Break-even sales in dollars = 200 units*20 = 4000

Answer is b.   $4,000

4)

Actual sales = 400000

Break-even point sales = 275000

Margin of safety = Actual sales - Break-even point sales = 400000 - 275000 = 125000

Margin of safety ratio = [Margin of safety/sales] *100 = [125000/400000] *100 = 31.25%

Answer is a.   31.25%