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Free CMA Exam Braindumps (page: 98)

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A not-for-profit social agency provides home health care assistance to as many patients as possible s budgeted appropriation CX) for next year must cover fixed costs of $5 million. and the annual per-patient cost (Y) of its services. However, the agency is preparing for a possible 10% reduction in its appropriation that will lower the number of patients served from 5,000 to 4,000 The reduced appropriation and the annual per- patient cost equal

  1. $5,000,000 $4,000
  2. $8,333,333 $833
  3. $9,000,000 $1,000
  4. $10,000,000 $5.000

Answer(s): C

Explanation:

This question applies CVP analysis in a not-for-profit context in which the agency wishes to assist as many people as possible. Thus, a breakeven point must be calculated. Total revenue (the appropriation) equals fixed cost plus the product of unit variable cost (per-patient annual cost) and the number of patients who can be assisted given the available resources. The following are simultaneous equations stated in the two unknowns:



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A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. s margin of safety is $40,000 What is the company's breakeven point?

  1. $360,000
  2. $320,000
  3. $288,000
  4. $80,000

Answer(s): A

Explanation:

The margin of safety equals sales above the breakeven point. Thus, if the margin of safety is $40,000, the breakeven point must be $360,000 ($400,000 sales -- $40,000)



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A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. Its margin of safety is $40,000. What are the company's fixed costs?

  1. $72,000
    B $80,000
  2. $288,000
  3. $320,000

Answer(s): A

Explanation:

The margin of safety equals sales above the breakeven point. Thus, if the margin of safety is $40,000. the breakeven point in sales dollars must be $360,000. If the contribution margin rah is 20%, the contribution margin (sales -- variable costs) at the breakeven point is $72,000 ($360,000 x 20%). This amount must equal fixed costs because sales equal the sum of fixed and variable costs at the breakeven point.



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For one of its divisions, Buona Fortune Company has fixed costs of $300,000 and a van able-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income 01 $90,000 per year from the division. What is the breakeven point in dollars?

  1. $300,000
  2. $500,000
  3. $750,000
  4. $1,050,000

Answer(s): C

Explanation:

Breakeven point is calculated by dividing the fixed costs ol $300,000 by the contribution margin percentage, which was 40%. Dividing $300,000 by .4 results in a breakeven point of $750,000.






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