Question

​Peeler's Smoothie Company has provided the following​ information: Sales price per unit Variable cost per unit Fixed costs per month Calculate the contribution margin ratio.​ (Round your answer to two decimal​ places.)

A. 28.57​%

B. 22.22​%

C. ​20%

D. 77.78​%

Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor. Benson uses standard costs to prepare its flexible budget. For the first quarter of the​ year, direct materials and direct labor standards for one of their popular products were as​ follows:

Direct​ materials: 3 pounds per​ unit; $3 per pound Direct​ labor: 4 hours per​ unit; $15 per hour Benson produced 4,000 units during the quarter. At the end of the​ quarter, an examination of the labor costs records showed that the company used 25,000 direct labor hours and actual total direct labor costs were $225,000.

What is the direct labor efficiency​ variance?

A. $15,040 U

B. $135,000 U

C. $135,000 F

D. $15,040 F

When the sales price per unit​ decreases, the breakeven point​ ________.

A. increases

B. decreases proportionately

C. decreases

D. remains the same

Answer 1

Answer

B. $135,000 U

Standard Hour (for actual output) = 4/1*4,000 = 16,000 Direct labor hour

Standard Price = $15

Actual Hour = 25,000 Direct labor hours

Direct Labor Efficiency Variance = (Standard Hour - Actual Hour)*Standard Price

= (16,000 - 25,000)*$15 = $135,000 Unfavourable

When the sales price per unit​ decreases, the breakeven point​ ________

A. Increases

The formula for Break-even point(units) = Total Fixed Cost / Contribution Margin per unit

The Break-even point depends on the Total Fixed cost and Contribution Margin per unit. When only sales price per unit decreases the contribution margin also decreases (Sales-Variable cost=Contribution). This increases the Break-even point because a higher number of units will be required to fetch the same amount of Fixed Cost.