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Free CMA Exam Braindumps (page: 84)

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Total production costs of prior periods for a company are listed as follows. Assume that the same cost behavior patterns can be extended linearly over the range of 3,000 to 35,000 units and that the cost driver for each cost is the number of units produced.



How many additional units should have been sold in order for the company to break even?

  1. 32,000
  2. 16,000
  3. 12,800
  4. 8,000

Answer(s): D

Explanation:

The breakeven point in units equals fixed costs divided by the difference between unit price and unit variable cost. Fixed costs were $160O00 [($300,000 sales--$180,000 VO) + $40,000 NOL], units sold equaled 24,000 ($300,000 sales · $12.50 SP), and unit variable cost was $7.50 ($180,000 VO + 24000 units sold). Accordingly, the breakeven point in units was 32,000 [$160,000 PC + ($12.50 SP --$7.50 unit VC)], and the additional units that should have been sold to break even equaled 8,000 (32,000 -- 24,000).



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Total production costs of prior periods for a company are listed as follows. Assume that the same cost behavior patterns can be extended linearly over the range of 31000to 35.000 units and that the cost driver for each cost is the number of units produced.



What is the average cost per unit at a production level of 8,000 units for costX?

  1. $5.98
  2. $5.85
  3. $7.90
  4. $4.83

Answer(s): A

Explanation:

CostX is a mixed cost (part variable and part fixed). The hi-low method can be used to determine the fixed and variable portions. Dividing the total cost of X at two different production volumes by the difference in units produced gives a unit variable cost of $4.83 [($178,260 --$23,700) + (35,000 units --3,000 units)]. Fixed cost must the before be $9,210 [$178,260 cost of X for 35,000 units--(35,000 units x $4.83)]. Total cost of X for 8,000 units is $47,850 [$9,210 + (8,000 units x $4.83)], and the average cost is $5.98 ($47,850 + 8,000).



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Positive operating income is shown on a cost-volume-profit chart when the

  1. Total variable expense line exceeds the total fixed expense line.
  2. Total expense line exceeds the total sales revenue line.
  3. Total sales revenue line exceeds the total fixed expense line.
  4. Total sales revenue line exceeds the total expense line.

Answer(s): D

Explanation:

A cost-volume-profit chart contains elements (lines, points, axes) that identify variable cost, fixed cost, the breakeven point, total revenue, profit, and volume in units. When the total sales revenue line rises above the total expense line, a company will have positive net income.



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Romashka, Inc. plans to introduce a new product. The marketing manager forecasts a unit selling price of $500. The variable cost per unit is estimated to be $100. In addition1 there is a total of $110,000 fixed indirect manufacturing costs, and $150000 in fixed operating costs associated with these units. What quantity will the company have to sell to break even?

  1. 220 units.
  2. 275 units.
  3. 520 units.
  4. 650 units.

Answer(s): D

Explanation:

The breakeven point in units is determined as follows:






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