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Free CMA Exam Braindumps (page: 80)

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View Related Case Study

The breakeven point in units sold for Tierson Corporation is 44,000. If fixed costs for Tierson are equal to $880, 000 annually and variable costs are $10 per unit1 what is the contribution margin per unit for Tierson Corporation?

  1. $0.05
  2. $20.00
  3. $44.00
  4. $88.00

Answer(s): B

Explanation:

The breakeven point in units is equal to the fixed costs divided by the contribution margin per unit. Thus, the UCM is $20.00 ($880 .000 ÷ 44,000 units).



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A manufacturer contemplates a change in technology that would reduce fixed costs from $800,000 to $700 .000. However, the ratio of variable costs to sales will increase from 68% to 80%.Whatwill happen to break-even level of revenues?

  1. Decrease by $301,470.50
  2. Decrease by $500,000
  3. Decrease by $1,812,500
  4. Increase by $1,000,000

Answer(s): D

Explanation:



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How much does each additional sales dollar contribute toward profit for a firm with $4 million break-even level of revenues and $1 .2 million in fixed costs including depreciation?

  1. $0.30
  2. $0.33
  3. $0.50
  4. $0.67

Answer(s): A

Explanation:

The $4 million breakeven level was calculated as follows:
Solving for CM% results in CM% = 30%. Thus, 30% of every dollar, or $0.30, contributes towards profits.



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The change in period-to-period operating income when using variable costing can be explained by the change in the

  1. Unit sales level multiplied by the unit sales price.
  2. Finished goods inventory level multiplied by the unit sales price.
  3. Unit sales level multiplied by a constant unit contribution margin.
  4. Finished goods inventory level multiplied by a constant unit contribution margin.

Answer(s): C

Explanation:

In a variable costing system, only the variable costs are recorded as product costs. All fixed costs are expensed in the period incurred. Because changes in the relationship between production levels and sales levels do not cause changes in the amount of fixed manufacturing cost expensed, profits more directly follow the trends in sales, especially when the UCM (selling price per unit--variable costs per unit) is constant. Unit sales times the UCM equals the total CM, and operating income (a pretax amount) equals the CM minus fixed costs of operations. If the UCM is constant and fixed costs are stable, the change in operating income will approximate the change in the CM (UCM x unit sales).






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