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Free CMA Exam Braindumps (page: 99)

Page 99 of 336
PDF with 1336 Questions
View Related Case Study

Cat fur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. Assume that Cat fur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to- one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability?

  1. The company is operating at the breakeven point.
  2. The company earned a profit.
  3. The company sustained a loss.
  4. Cannot be deterrence from the informant given.

Answer(s): B

Explanation:

The expected sales mix is 40% for Product X and 60% for Product V). Given that Product X has a 40% contribution margin ratio and Product V has a 30% contribution margin ratio, selling more of Product X and less of Product V increases the average contribution margin ratio. The effect is to lower the breakeven point Thus, if the new composite unit includes 2 units of Product X and 2 units of Product V). the composite unit selling price is $80 [(2 x $10) + (2 x $30)]. and the composite UCM is $26 {J2 x ($10 --$6)] + (2 x ($30-- $21)D, The new breakeven point in composite units is therefore 11.53846 ($300,000 FC · $26 UCM). and the new breakeven point in sales dollars is $923,077 (11.538.46 x $80) Given that sales reached the budgeted breakeven point of $942,857, Cat fur must have made a profit of $19,780 ($942,857 -- $923,077).



View Related Case Study

A company wants to open a new store in one of three nearby shopping malls. In Mall A. the rent will be $300,000 per year. In Mall B. the rent will be 4% of gross revenues In Mall C. the rent will be $150,000 per year pius 3% of gross revenues. Assume that revenues and and other elements under consideration are the same for all three malls.
Which mall should the company choose it revenues are expected to be $6,000,000 per year?

  1. MaII
  2. MaII
  3. Mall
  4. The company will be indifferent between two of the Choices.

Answer(s): C

Explanation:

The answer depends on the expected level of revenues. If the company expects revenues to be $6,000,000 per year, the calculation is as follows:
Mall A: $300.000
Mall B $6,000,000 x 4% = $240,000
1Mall C: $6,000,000 x 3% $180000 + $150,000 $330.000 Thus, Mall B is preferable



View Related Case Study

company wants to open a new store in one of three nearby shopping malls. In Mall A, the rent will be $300,000 per year. In 4alI B, the rent will be 4% of gross revenues. In Mall C, the rent will be $150,000 per year pIus 3% of gross revenues Assume hat revenues and all other elements under consideration are the same for all three malls. If the company expects revenues to be $ 10.000.000 per year. which mall should be chosen?

  1. Mall A,
  2. MaII
  3. Mall
  4. The company will be indifferent between two of the choices.

Answer(s): C

Explanation:

It the company expects revenues to be $10,000,000 per year. the calculation is as follows.
Mall A. $300.000
Mall B: $10,000,000 x 4% = $400,000
Mall C: $10,000.000 x 3% $300,000 + $150.000 $450,000 Thus, Mall A is preferable



View Related Case Study

A company wants to open a new store in one of three nearby shopping malls. In Mall A. the rent will be $300,000 per year. In Mall B, the rent will be 4% of gross revenues In Man C, rent will be $150,000 per year plus 3% of gross revenues. Assume that revenues and all other elements under consideration are the same for all three malls.
What is the maximum level of revenues at which Mall C will be the most desirable of the three options?

  1. $149,999
  2. $5,000,000
  3. $15,000,000
  4. Man C will never be the most desirable choice.

Answer(s): D

Explanation:

Mall C will never be the optimal choice because it will be less desirable than Mall B as long as 1% of gross revenue is less than $150,000. that is. until revenues reach $15,000,000 [$150,000 minimum ÷ (4% -- 3%)] However, at any level of revenues greater than $7,500,000 ($300,000 . 4%), Mall A (a flat $300,000 rental) will be more desirable than either of the other choices. Thus, Mall C will never be the most desirable.



Page 99 of 336



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