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Free CMA Exam Braindumps (page: 85)

Page 85 of 336
PDF with 1336 Questions
View Related Case Study

Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows. The cost information below relates to the product



The company will also be absorbing $120,000 of additional fixed costs associated with this new product. A corporate fixed charge of $20000 currently absorbed by other products will be allocated to this new product. If the selling price is $14 per unit, the breakeven point in units (rounded to the nearest hundred) for surge protectors is

  1. 8,500 units.
  2. 10,000 units.
  3. 15,000 units.
  4. 20,000 units.

Answer(s): D

Explanation:

The breakeven point in units equals total additional fixed costs divided by the unit contribution margin. Unit variable costs total $8 ($3.25 + $4.00 + $75). Thus, UCM is $6 ($14 unit selling price--$6-unit VC), and the breakeven point is 20,000 units ($120,000 PC ÷ $6). Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows. The cost information below relates to the product



The company will also be absorbing $120.000 of additional fixed costs associated with this new product. A corporate fixed charge of $20000 currently absorbed by other products will be allocated to this new product.



View Related Case Study

How many surge protectors (rounded to the nearest hundred) must Bruell Electronics sell at a selling price of $14 per unit to gain $30 p000 additional income before taxes?

  1. 1070O units.
  2. 121O0 units.
  3. 20,000 units.
  4. 25,000 units.

Answer(s): D

Explanation:

The number of units to be sold to generate a specified pre-tax income equals the sum of total fixed costs and the targeted pre-tax income, divided by the unit contribution margin. Unit variable costs total $8 ($3.25 + $4.00 + $75), and UCM is $6 ($14 unit selling price -- $8). Thus, the desired unit sales level equals 25,000 units [($120,000 + $30,000) + $61.



View Related Case Study

Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows. The cost information below relates to the product



The company will also be absorbing $120.000 of additional fixed costs associated with this new product. A corporate fixed charge of $20,000 currently absorbed by other products will be allocated to this new product.How many surge protectors (rounded to the nearest hundred) must Bruell Electronics sell at a selling price of $14 per unit to increase after4ax income by $30,000? Bruell Electronics' effective income tax rate is 40%.

  1. 10,700 units.
  2. 12,100 units.
  3. 20,000 units.
  4. 28,300 units.

Answer(s): D

Explanation:

The number of units to be sold to generate a specified pre4ax income equals the sum of total fixed costs and the targeted pre-tax income, divided by the unit contribution margin. Given a desired after-tax income of $30,000 and a tax rate of 40%, the targeted pre-tax income must be $50,000 [$30,000 + (1.0-- 4)]. Unit variable costs total $8 ($3.25 + $4.00 + $75), and UCM is $6 ($14 unit selling price -- $8). Hence, the desired unit sales level is 28,333 [($120,000 + $50,000) + $6]. Rounded to the nearest hundred, the answer is $28,300.



View Related Case Study

BE&H Manufacturing is considering dropping a product line. It currently produces a multi-purpose woodworking clamp in a simple manufacturing process that uses special equipment. Variable costs amount to $6.00 per unit. Fixed overhead costs, exclusive of depreciation, have been allocated to this product at a rate of $3.50 a unit and will continue whether or not production ceases. Depreciation on the special equipment amounts to $20,000 a year. If production of the clamp is stopped, the special equipment can be sold for $18,000; if production continues, however, the equipment will be useless for further production at the end of 1 year and will have no salvage value. The clamp has a selling price of $10 a unit. Ignoring tax effects, the minimum number of units that would have to be sold in the current year to break even on a cash flow basis is

  1. 4,500 units.
  2. 5,000 units.
  3. 20.000 units.
  4. 36,000 units.

Answer(s): A

Explanation:

The BEP in units is equal to fixed costs divided by the difference between unit selling price and 1 unit variable cost (UCM). The $18,000 salvage value, the cash flow to be received if production is discontinued, is treated here as a fixed cost. Hence, continuation of the product line will permit the firm to break even or make a profit only if the total CM is $18,000 or more.



Fixed overhead allocated is not considered in this calculation because it is not a cash flow and will continue regardless of the decision.



Page 85 of 336



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