Chapter 6 – Review Questions 1 At the break-even point of 400 units, the variable costs were $400 and the fixed costs were $200. What will the 401st unit sold contribute to profit before income taxes? A. $.00 B. $.50 C. $1.00 D. $1.50 2 XYZ Company's sales are $750,000 with operating profits of $130,000. If the contribution margin ratio is 40%, what did the fixed costs amount to? A. $370,000 B. $300,000 C. $270,000 D. $170,000 E. $130,000 3 Fowler Manufacturing Company has total fixed costs of $225,000 for the production of its only product. Estimated sales are $750,000 (150,000 units) and a before-tax profit of $125,000 at that level of sales is desired by the controller. What unit contribution margin is required to meet this profit target? A. $3.000 B. $2.667 C. $2.333 D. $2.000For the following question(s) refer to the information below. Donco Company manufactures and sells two products: Widgetmaster and Gadgetmaster. The two products have the following characteristics: Widgetmaster Gadgetmaster Selling price per unit $25 $15 Sales revenue $375,000 $450,000 Variable cost per unit $15 $12 Total fixed costs for the company are $160,000 but increase to $200,000 for production levels over 50,000 total units. Selling price and variable cost per unit are the same at all production levels. 4 What is the break-even point in total unit sales for Donco, assuming a constant product-sales mix between Widgetmasters and Gadgetmasters? A. 10,000 B. 16,000 C. 24,615 D. 30,000 5 How many total units must be sold for the Donco Company to earn an operating profit of $200,000 (before tax), assuming a constant product mix between Widgetmasters and Gadgetmasters? A. 75,000 B. 67,500 C. 45,000 D. 37,500 ANSWERS 1 B 2 D 3 C 4 D 5
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