QUESTION: 366 Topic 6: Part 2 Sec Six (318 to 450)

Mason Enterprises has prepared the following budget for the month of July:

Assuming thattotal fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

20,455 units.
21,429units.
21,8l9units.
6,818 units.

Answer(s): C

Explanation:

Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 price --$4 VC), $7 ($15 --$8 VC), and $9 ($18 price --$9 VC), respectively. Hence, the contribution margin for a composite unit is $55 [(3 x $6) + (4 x $7) + (1 x $9)], and the breakeven point is 2,727.2727 composite units ($150,000 PC + $55). This amount equals 21,819 (rounded up) individual units (8 x 2,727 .2727).

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QUESTION: 367 Topic 6: Part 2 Sec Six (318 to 450)

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A company allocates its variable factory overhead based on direct labor hours. During the past 3 months1 the actual direct labor hours and the total factory overhead allocated were as follows:

Based upon this information, monthly fixed factory overhead was

$50,000
$46,667
$33,333
$30,000

Answer(s): A

Explanation:

This question requires solving simultaneous equations because both the variable overhead per direct labor hour (Y) and the fixed overhead (X) are unknown.

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QUESTION: 368 Topic 6: Part 2 Sec Six (318 to 450)

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A company has just completed the final development of its only product, general recombinant bacteria, which can be programmed to kill most insects before dying themselves. The product has taken 3 years and $6,000,000 to develop. The following costs are expected to be incurred on a monthly basis for the normal production level of 1,000,000 pounds of the new product:

Ata sales price of $5.90 per pound1 the sales in pounds necessary to ensure a $3,000,000 profit the first year would be (to the nearest thousand pounds)

13,017,000 pounds.
14,000,000 pounds.
15,000,000 pounds.
25,600,000 pounds.

Answer(s): C

Explanation:

In breakeven analysis, total revenue equals fixed costs plus variable costs. If a given profit is desired, it is treated as a fixed cost. Exclusive of profit, the annual fixed cost is $42,000,000 ($3,500000 per month of fixed factory overhead and SG&A expense x 12 months). The variable cost per pound is $2.90 [($300,000 ÷ $1 ,250,000 + $450000 + $900,000) + 1,000,000 lbs.]. If X equals sales in pounds, the level of sales needed to earn a $3,000,000 profit is

This analysis assumes that no additional costs are incurred when production exceeds the normal level of 1,0001000 pounds per month.

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QUESTION: 369 Topic 6: Part 2 Sec Six (318 to 450)

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A company that sells its single product for $40 per unit uses cost-volume-profit analysis in its planning. The company’s after-tax net income for the past year was $1.1 88,000 after applying an effective tax rate of 40%. The projected costs for manufacturing and selling its single product in the coming year are in the next column.

The dollar sales volume required in the coming year to earn the same after4ax net income as the past year is

$20,160,000
$21,600,000
$23,400,000
$26,400,000

Answer(s): B

Explanation:

The desired after--tax net income is $1,188,000 (the past year's amount). Given a 40% tax rate, the pretax equivalent is $1,980,000 [$1,188,000 ÷(1.0-- .40)]. Pretax net income equals dollar sales(unit sales x $40), minus total fixed costs, minus total variable costs (unit sales x unit variable cost). Hence, the contribution margin (sales -- variable costs) is equated with the sum of fixed costs and the targeted pretax net income. Unit sales (S) equal 540,000, and sales dollars equal $21,600,000 (540,000 units x $40).

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QUESTION: 366 Topic 6: Part 2 Sec Six (318 to 450)

Explanation:

QUESTION: 367 Topic 6: Part 2 Sec Six (318 to 450)

Explanation:

QUESTION: 368 Topic 6: Part 2 Sec Six (318 to 450)

Explanation:

QUESTION: 369 Topic 6: Part 2 Sec Six (318 to 450)

Explanation: