Question

In: Accounting

Total sales revenue is $1000, total variable costs are $600 and total fixed costs are $1000....

Total sales revenue is $1000, total variable costs are $600 and total fixed costs are $1000. The price is $10 per unit. Compute the break-even volume in units (assume that the break-even point is in the relevant range).

A) 166.7 units

B) 250 units

C) 280 units

D) 2500 units

Beta company allocates fixed overhead costs based on direct labor dollars, with an allocation rate of $5 per DL$. Beta sells 1000 units of product X per month at a price of $40 per unit. The variable costs are: direct materials, $10/unit, direct labor $4/unit, and variable overhead $2/unit. Compute the profit margin per unit of product X

A) $4

B)$20

C) $21.5

D) $24

E)$26

Beta is planning to increase the price of Product X to $50 per unit. It expects sales volume to decrease by 20%(from the original level of 1000 units per month) after the price increase. How much will the profit change in the short term after this price increase?

A) decrease by $2800

B) decrease by $800

C) No change

D) increase by $3200

E) increase by $7200

You have the following data for product X: sales revenue is $10000, variable costs are $4000, allocated fixed costs are $3000. If you drop product X in the long term total profit will:

A) decrease by $6000

B)decrease by $3000

C) remain the same

D) increase by $3000

E) increase by $6000

Explanation for answers please

Expert Solution

All working forms part of the answer
Question 1

A	Sale price per unit	$ 10.00
B	Unit Variable cost	$ 6.00
C=A-B	Contribution margin	$ 4.00
D	Fixed cost	$ 1,000.00
E=D/C	Break Even point in Units	250

Hence the correct answer is Option B: 250 units

Question 2

A	Direct labor cost per unit	$ 4.00
B	Allocation rate	$5 per DL $
C=A x B	Overhead allocated	$ 20.00
D	Direct materail	$ 10.00
E	Direct labor	$ 4.00
F	Variable Overhead	$ 2.00
G=C+D+E+F	Total Cost	$ 36.00
H	Unit Sale price	$ 40.00
I=H-G	Profit margin per unit	$ 4.00

Hence, the correct answer is Option A: $ 4 per unit

Question 3

A	Current Sale price	$ 40.00	$ 50.00
B	Units Sold	1000	800
C=AxB	Sales Revenue	$ 40,000.00	$ 40,000.00
D	Variable cost	$ 16,000.00	$ 12,800.00
E=C-D	Contribution margin	$ 24,000.00	$ 27,200.00

Contribution margin increases from $24,000 to $27,200 (increases by $ 3,200)

Hence, correct answer is Option D: Increases by $3,200

Question 4

If product X is dropped, the contribution margin earned will be lost.

Contribution margin = $10000 sales revenue - $ 4000 variable cost = $ 6,000

Hence, profit will decrease by $ 6,000 [Option A]

ekkarill92 answered 1 year ago

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