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Free CMA Exam Braindumps (page: 104)

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The budget data for the Bid well Company appear below.


If the Bid well Company is subject to an effective income tax rate of 40%, the number of units Bid well must sell to earn an after-tax profit of $90,000 is?

  1. 100,000 units.
  2. 120.000 units
  3. 102.858 units.
  4. 145,000 units

Answer(s): B

Explanation:

Because the tax rate is 40%, the $90.000 after-tax profit is 60% of pre-tax income. Thus, toll earn an income of $90,000 after tax, the pre-tax income must be $150000 ($90,000 .6), Dividing the fixed costs of $210,000 plus the desired before-tax income of $150,000 by the $3 contribution margin per unit gives a breakeven point of 120,000 units,



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The budget data for the Bid well Company appear below


If fixed costs increased $31 .500 with no other cost or revenue factors changing, the breakeven sales in units is

  1. 34,500 units
  2. 80,500 units.
  3. 69,000 units.
  4. 94,150 units.

Answer(s): B

Explanation:

The breakeven point equals fixed costs divided by the contribution margin per unit. The new total for fixed costs is $241,500, and the contribution margin per unit is still $3 The breakeven point is 80,500 units.



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Stuffed Animals, Inc. has decided to focus strictly on producing and selling one type of teddy bear. For the upcoming year, Stuffed Animals, Inc. hopes to make a 25% profit on sales fixed costs are set at $51,000. and variable costs are $9.50 per unit. If teddy bears are sold at $15 each, how many bears must be sold to meet the profit goal?

  1. 5.514
  2. 9,273
  3. 13,600
  4. 29,143

Answer(s): D

Explanation:

Sales equal the sum of fixed costs, variable costs, and profit. The profit is the selling price per unit multiplied by the percentage profit desired. If x equals unit sales,



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Barney Corporation sells sets of encyclopedias. Barney sold 4,000 sets last year at $250 a set if the variable cost per set was $175 and the fixed costs for Barney were $100000. What is Barney's degree of operating leverage (DOL)?

  1. 0.67
  2. 0.75
  3. 1.5
  4. 3.0

Answer(s): C

Explanation:

The degree of operating leverage (DOL) can be calculated from the formula [Q(P - V)] [Q(P V) - F], if 0 is the number of units sold, P is the unit selling price. V is the unit variable cost, and F is the fixed cost. Thus, the DOL is {(4.000 x $75) [(4,000 x $75) 100,000]}






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