Question

QUESTION 9 Boomerang company sells a product at $100 per unit that has unit variable costs of $30. The company's break-even sales point in sales dollars is $150,000. How much profit will the company make if it sells 4,000 units? A. $120,000 B. $70,000 C.$175,000 D. $215,000 QUESTION 10 To find the break-even point for a company that sells several products, the analyst must make an assumption about what the sales mix will be and calculate a weighted average contribution margin based on that sales mix. True False QUESTION 11 Kiwi Company incurred $45,000 of fixed cost and $60,000 of variable cost when 5,000 units of product were made and sold. If the number of units sold doubles, the cost per unit will: A. double as well B. stay the same. C. increase but will not double. D. decrease.

Answer 1

9ans:

Break even point sales = $150,000

Selling price = $100

Variable cost = $30

Contribution margin per unit = $70 (i.e., 100-30)

Break even point sales:

= ( Fixed cost/ unit contribution margin) * selling price

$150,000 = (Fixed cost / $70)*$100

Fixed costs = ( $150,000/$100)*$70

Fixed costs = $105,000

If 4,000 units sold, then

Contribution margin = (4,000 * $70)

Contribution margin = $280,000

Profit= Contribution margin - Fixed costs

= $280,000 - $105,000

Profit = $175,000

10Ans: True

Analyst must take assumptions and take appropriate actions

11Ans: Option C Increase but will not double

If the number of units sold doubles, variable cost get doubles whereas fixed cost remain same. Therefore, cost per unit will increase but will not double.

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