Question

QUESTION 20 Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, Yerke sold 12.000 gyms and 4,000 tree houses. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the new (combined, overall or package) contribution margin ratio (rounded to two decimal places)? a. 50% b.62% C. 38% d. 60% e. 40% QUESTION 21 Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253.750. Last year. Yerke sold 12.000 gyms and 4,000 tree houses. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the number of jungle gyms sold at break-even? a. 1,002 b. 668 c. 2,625 d. 1.750 e. 875

Answer 1

Question 20:

The correct answer is e) 40%

Supporting calculations:

	Jungle Gyms (a)	Tree Houses (b)	Combined (a + b)
Selling price per unit (y)	$120	$200	$320
Less: Variable cost per unit	($90)	($100)	($190)
Contribution margin per unit (x)	$30	$100	$130
Contribution margin ratio (x/y*100)	25.00%	50.00%	40.63%
Therefore, combined margin ratio is 40.63%.
Note: There is no change in the contribution margin ratio when the production or demand changes from 4,000 to 8,000 units because contribution margin per unit is fixed.

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