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Free CMA Exam Braindumps (page: 106)

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Donne Corporation manufactures and sells T-shirts imprinted with collage names and slogans. Last year. the shirts sold for $750 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20.000 shirts to break even. The net income last year was $5,040. Donnelly's expectations for the coming year include the following:
· The sales price of the T-shirts will be $9
· Variable cost to manufacture will increase by one-third · Fixed costs will increase by 10%
· The income tax rate of 40% will be unchanged
121. If Donnelly Corporation wishes to earn $22,500 in net income for the coming year, the company's sales volume in dollars must be?

  1. $213.750
  2. $257.625
  3. $207.000
  4. $229.500

Answer(s): D

Explanation:

An after-tax net income of $22,500 equals a pretax income of $37.500 [$22,500 + (140% tax rate)] With a UCM of $6 contributing toward the $153,000 total of fixed cost ($115,500) and desired profit ($37,500). 25,500 units ($153,000 $6) must be sold.
At $9 per unit, sales revenue is $229,500.



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The ratio of fixed costs to the unit contribution margin is the?

  1. Breakeven point
  2. Profit margin.
  3. Operating profit
  4. Contribution margin ratio.

Answer(s): A

Explanation:

The breakeven point is the level of sales at which revenues equal the sum of variable and fixed costs. Consequently. the contribution margin equals fixed costs at the breakeven point. Because this relationship is true, the breakeven point in units sold can be determined by dividing fixed costs by the difference between unit selling price and unit variable cost (unit contribution margin)



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A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for every 5 units of V (2.5). Fixed costs are $49.500. The unit contribution margins for X arid V are $2.50 and $1.20. respectively. Considering the company as a whole, the number of composite units to break even is?

  1. 1.650
  2. 4.500
  3. 8,250
  4. 22,500

Answer(s): B

Explanation:

The composite breakeven point for a multiproduct firm is computed by dividing total fixed costs by a composite contribution margin Composite contribution margin 2($2
50) + 5($1 .20) $11 BEP $49,500 + $11 = 4.500 composite units



View Related Case Study

A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for even 5 units of Y (2:5). Fixed costs are $49,500 The unit contribution margins for X and Y are $2.50 and $1.20. respectively. If the company had a profit of $22,000. the unit sales must have been?

  1. 5.000 12,500
  2. 13.000 32,500
  3. 23.800 59,500
  4. 32.500 13,000

Answer(s): B

Explanation:

Unit sales can be computed by adding profit to fixed costs and &widing by the composite contribution margin.


Thus. 13.000 units of Product X and 32.500 units of Product Y must have been sold






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