Question

1. Using the annual profit formula Y =b(x) - a, the b represents:

Select one:

a. Annual before-tax profit

b. Annual fixed costs

c. Contribution margin per unit

d. Variable costs per unit

2.

Using the annual profit formula, Y = b(x) - a, the a represents:

Select one:

a. Variable costs per unit

b. Annual fixed costs

c. Total profit

d. Total annual units sold

3.

Using the annual profit formula, Y = b(x) - a, what is the formula for calculating the break-even point in units?

Select one:

a. Total annual fixed costs / contribution margin per unit

b. Total annual fixed costs / variable costs per unit

c. Profit / contribution margin per unit

d. Fixed costs per unit / contribution margin per unit

4.

Johnson, Inc. sells golf clubs. The selling price is $100 / club. Variable costs are $30 / club and annual fixed costs are $20,000. What is the contribution margin percentage per club?

Select one:

a. 30%

b. 45%

c. 60%

d. 70%

5.

Johnson, Inc. sells golf clubs. The selling price is $100 / club. Variable costs are $30 / club and annual fixed costs are $20,000. The break-even point in sales dollars is closest to?

Select one:

a. $285

b. $28,500

c. $25,000

d. $35,000

Answer 1

Answers

• Answer 1: Option ‘c’: the b represents the Contribution margin per unit.
• Answer 2: Option ‘b’: Annual Fixed Costs
• Answer 3: Option ‘a’: Total annual fixed costs/contribution margin per unit.
• Answer 4: Option ‘d’: 70%

Contribution per unit = $100 - $30 = $70
Contribution margin percent = Contribution margin per unit / Sale price per unit = 70/100 = 70%

• Answer 5:Option ‘b’ $28500
  Contribution margin ratio = 70%
  Break Even point in sales dollars = Fixed cost/Contribution margin ratio
  =$20000/70%
  =$28571.43
  Hence, the answer is CLOSEST to $28500.