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Free CMA Exam Braindumps (page: 95)

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The statement of income for Dimmell Co. presented below represented the operating result for the fiscal year just ended. Dimmell had sales of 1,800 tons of product during the current year. The manufacturing capacity of Dimmell's facilities is 3.000 tons of product.



The breakeven volume in tons of product for 2002 is ?

  1. 400 tons
  2. 1,100 tons
  3. 900 tons
  4. 550 tons

Answer(s): B

Explanation:

The breakeven formula sets sales equal to the sum of fixed and variable costs. Thus, sales equal $247,500 plus 0.55S. The variable costs of $495,000 are 55% of the total sales of $900,000. Working through the formula, sales are equal to $550,000. Because 1,800tons were sold for $900,000. the selling price is $500 per ton ($900,000+ 1,800tons). The breakeven point in tons is the breakeven point in dollar of $550,000 divided by $500 per ton, or 1,100 tons.



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The statement of income for Dimmell Co presented below represents the operating resifts for the tsar year Just ended Dimmell had sales of 1.800 tons of product during the current year The manufacturing capacity of Dimmell's facilities is 3.000 tons of product.


If the sales volume is estimated to be 2,100 tons in the next year, aid if the prices and costs stay at the same levels and amounts next year. The after-tax net income that Dimmell can expect for 2003 is

  1. $135.000
  2. $110,250
  3. $283,500
  4. $184.500

Answer(s): A

Explanation:

Because the selling price is $500 per ton, sales will be $1,050,000. The contribution margin ratio is 45% ($405,000 ÷ $900,000), resulting En a contribution margin of $472,500. Net income before taxes is the contribution margin minus fixed costs of $247,500. which equals $225,000 Net income is $135,000 [$225,000 * (1.0 -40%)tax rate).



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The statement of income for Dimmell Co presented below represents the operating results for me fiscal year just ended Dimmell had sales of I .800 tons of product during the current year. The manufacturing capacity of Dimmers facilities is 3,000 tons of product.



Dimmell has a potential foreign customer that has offered to buy 1.500 tons at $450 per ton. Assume that all of Dimmell's costs would be at the same levels arid rates as in 2002. Whet net income after taxes would Dimmell make if it took this order and rejected some business from regular customers so as not to exceed capacity'?

  1. $297,500
  2. $252.000
  3. $211,500
  4. $256,500

Answer(s): C

Explanation:

Total sales equal $1 A25.000. The unit variable cost of sales is $275 (55% of $500). and total variable cost of sales is $825,000 (3,000 units x $275). The contribution margin is $1 A25.000 of sales minus $825,000 cost of sales Net income before taxes is $600,000 minus $247,500 fixed costs, or $352,500 Net income is 60% (1.0--40% tax rate) of the net income before taxes of $352,500, or $211,500



View Related Case Study

The statement of income for Dimmell Co. presented below represents the operating results for the fiscal year just ended. Dimmell had sales of 1.800 tons of product during the current year, The manufacturing capacity of Dimmell's facilities is 3,000 tons of product.


Dimell plans to market its product in a new territory Dimmell estimates that an advertising and promotion program costing $81,500 annually would need to be undertaken for the next 2 or 3 years In addition, a $25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Dimell's current after-t income of $94.500?

  1. 307.5 tons.
  2. 1,O95Otons
  3. 273 333tons
  4. 1,S45Otons.

Answer(s): A

Explanation:

Given that $61,500 is required for advertising and promotion, these are fixed costs that will have to be covered by the CM for sales in the new market of $200 each. The UCM for regular sales was $225 ($500 selling price x 45%), and there is a $25 additional variable commission expense for sales in the new territory. The 45% CM is computed by dividing the $405,000 CM by the $900,000 of sales. Thus, the new unit contribution of $200 is divided into $61,500 of incremental fixed costs, resulting in additional sales from the new program of 307.5 tons at the breakeven point.






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