Question

Production and sales estimates for May for Cardinal Co. are as follows:

Estimated inventory (units), May 1	19,000
Desired inventory (units), May 31	19,300
Expected sales volume (units):
Area W	6,700
Area X	9,400
Area Y	7,600
Unit sales price	$12.00

The number of units expected to be sold in May is

a.28,440

b.23,700

c.21,330

d.14,300

If fixed costs are $295,000, the unit selling price is $73, and the unit variable costs are $53, what are the old and new break-even sales in units (rounded to a whole number) if the unit selling price increases by $7?

a.5,566 units and 10,426 units

b.4,041 units and 14,750 units

c.14,750 units and 4,041 units

d.14,750 units and 10,926 units

Answer 1

Question 1

Correct answer---------b.23,700

Working

Expected sales volume (units):
Area W	6,700
Area X	9,400
Area Y	7,600
The number of units expected to be sold in May	23,700

Question 2

Correct answer---------d.14,750 units and 10,926 units

Working

		Old	New
A	Sale Price per unit	$                73.00	$ 80.00
B	New variable cost per unit	$                53.00	$ 53.00
C =A-B	New contribution margin	$                20.00	$ 27.00
D	Fixed Cost	$      295,000.00	$ 295,000.00
E=D/C	Break Even point in Unit Sales	14,750	10,926