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Free CMA Exam Braindumps (page: 99)

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For one of its divisions, Buona Fortuna Company has fixed costs of $300,000 and a variable-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income of $90,000 per year from the division. How many units will Buona Fortuna have to sell to earn a pre-tax income of $90,000 per year?

  1. 65.000 units.
  2. 75.000 units.
  3. 77.250 units,
  4. 97,500 units.

Answer(s): D

Explanation:

The breakeven point is calculated by dividing the fixed costs by the unit contribution margin in dollars To determine how many units need to be sold to yield a specific income, that income should be treated as a fixed cost. Thus, adding the $90,000 of desired income to the $300,000 of fixed costs results in a numerator of $390,000. Hence, the necessary unit sales equals 97.500 units [$390,000 + ($10 unit price -- $6 unit variable cost)].



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A company wants to open a new store in one of two nearby shopping malls. In Mall A. the rent will be $250 .000 per year. In Mall B. the rent will be 4% of gross revenues. Assuming that revenues and all other elements under consideration are the same for both malls, at what level of revenues will the company be indifferent between the two malls?

  1. $1 .000.000
  2. $4.000.000
  3. $6.250.000
  4. $12,500,000

Answer(s): C

Explanation:

The level of indifference is calculated by setting the equation for the first mall (a flat $250,000) equal to the equation for the second mall). Solving for that equation involves dividing $250,000 by 4%. resulting in an indifference level of revenues of $6,250,000.



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Cat fur Company has fixed costs of $300,000. It produces two products, X and Y Product has a van able cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. What is Cat furs breakeven point in dollars?

  1. $300,000
  2. $750,000
  3. $857,142
  4. $942,857

Answer(s): D

Explanation:

A helpful approach in a multiproduct situation is to make calculations based on the composite unit, i.e.. 2 units of Product X and 3 units of Product Y (a 66% ratio). The selling price of this composite unit is $110 [(2 $10) + (3 x $30)]. The UCM of the composite unit is $35 fJ2 x ($10-- $6)] + [3 x ($30-- $2 1)11. Consequently, the breakeven point in composite units is 8,571.43 ($300,000 FC. $35 UCM), and the breakeven point in sales dollars is $942,857 (8.571 43 x $110)



View Related Case Study

Cat fur Company has fixed costs of $300.000. It produces two products, X and Y Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. How many units of Product Y will Cat fur sell at the breakeven point?

  1. 8,571 units.
  2. 20.454 units.
  3. 23.377 units.
  4. 25,714 units.

Answer(s): D

Explanation:

A composite unit was destined as consisting of 2 units of Product X and 3 units of roduct Y. The breakeven point in composite units is 8,571 A3. According, the units of Product V sold at the breakeven point are equal to 25.714(8.571.43 x 3).






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