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?
Answer(s): D
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,
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)?
Answer(s): C
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]}
When an organization is operating above the breakeven point, the degree or amount that sales may decline before losses are incurred is called the?
The margin of safety is me excess of budgeted revenues over breakeven revenues. It is considered in sensitivity analysis
Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year. the shirts sold for $7.50 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 expectations for me 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 unchangedThe selling price that would maintain the same contribution margin rate as last year is?
Last year, unit variable cost was $225, so the unit contribution margin (UCM) was $5.25 ($7.50 price --$2.25). and the contribution margin rate (CMR) was 70% ($5.25. $7.50). If variable costs increase by one-third, the new variable cost will be $3 [$2.25 x (4 3)]. If a 70% CMR is desired, the $3 variable cost will be 30% of sales, and the unit sales price will be $10 ($3 30%)
Donnelly Corporation manufactures and sells T-shirts imprinted with college 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 unchangedThe number of T-shirts Donnelly Corporation must sell to break even in the coming year is?
Answer(s): B
The breakeven point (BEP) in units equals fixed cost divided by UCM. Fixed cost for the previous year was $105,000 (20,000 units at breakeven x $5.25 UCM). Fixed cost for the current year is $1 15.500 ($105,000 x 110%) The new UCM is $6 ($9 selling price $3 variable cost). Accordingly, the BEP is 19,250 units ($115.500. $6).
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