Question

Broadway Company produces and sells two models of calculators. The following monthly data are provided:

	Standard				Premium
Unit selling price	$	100			$	150
Unit variable manufacturing cost	$	60			$	90
Unit variable selling and administrative cost	$	15			$	30
Number of units produced and sold		3,000				1,000

Total monthly fixed costs are expected to be $15,000. What is the break-even point in sales dollars at the expected sales mix? (Do not round your intermediate calculations.)

$19,231

$43,478

$68,182

$64,286

When drawing a cost-volume-profit graph, how are the axes labeled?

The horizontal axis would be labeled with dollars (of cost or revenue), while the vertical axis would be labeled with number of units (volume or activity).

The horizontal axis would be labeled with dollars (of total fixed costs), while the vertical axis would be labeled with dollars (of total variable costs).

The horizontal axis would be labeled with number of units (volume or activity), while the vertical axis would be labeled with dollars (of cost or revenue).

None of these answers is correct.

When performing sensitivity analysis, which of the following is an example of a variable that management may consider changing to answer "what if" questions?

Variable cost per unit

Sales price per unit

Fixed cost per unit

Both Variable cost per unit and Sales price per unit are correct.

Answer 1

Contribution margin per unit = Unit selling price - Unit variable manufacturing cost - Unit variable selling and administrative cost

Weighted average contribution margin per unit = (Standard contribution margin per unit * 3,000 / 4,000) + (Premium contribution margin per unit * 1,000 / 4,000)

= [($100 - $60 - $15) * 3,000 / 4,000] + [($150 - $90 - $30) * 1,000 / 4,000]

= $18.75 + $7.5

= $26.25

Break-even units = Fixed costs / Weighted average contribution margin per unit

= $15,000 / $26.25

= 571 units

Standard break-even revenues = 571 units * 3,000 / 4,000 * $100 per unit = $42,825

Premium break-even revenues = 571 units * 1,000 / 4,000 * $150 per unit = $21,413

Break-even point in sales dollars = $42,825 + $21,413

= $64,238

The answer is $64,286 (difference due to decimal differences)

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The answer is The horizontal axis would be labeled with number of units (volume or activity), while the vertical axis would be labeled with dollars (of cost or revenue).

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The answer is Both Variable cost per unit and Sales price per unit are correct.