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CHAP 10

Terms in this set (12)

The Finance Assistant from Castle Associates has recently returned from a management
accounting seminar at which she was introduced to some new management accounting
terms and formulae. She has now got several of the terms and formulae mixed up in her
mind.
The contribution required to breakeven is best given by which of the following?
A Unit selling price less unit variable cost
B Unit contribution x number of units sold
C Total fixed costs
D Total fixed costs/contribution ratio
A Total fixed costs
Which two of the following show how the breakeven point in units can be calculated?
A Total fixed costs/contribution per unit
B Contribution required to break even/contribution per unit
C Contribution/sales
D Fixed costs/costs to sales ratio
A Total fixed costs/contribution per unit
B Contribution required to break even/contribution per unit
A company makes a single product and incurs fixed costs of £30,000 per month. Variable cost per unit is £5 and each unit sells for £15. Monthly sales demand is 7,000 units.
The breakeven point in terms of monthly sales units is
A 2,000units
B 3,000 units
C 4,000 units
D 6,000 units
B 3,000 UNITS
Uula plc makes a single product, which it sells for £16 per unit. Fixed costs are £76,800 per month and the product has a contribution ratio of 40%.
In a month when actual sales were £224,000, Uula plc's margin of safety, in units, was
A 2,000
B 12,000
C 14,000
D 32,000
A 2,000
A company has budgeted sales revenue of £500,000 for Period 1, with an associated contribution of £275,000. Fixed production costs are £137,500 and fixed selling costs are £27,500.
What is the breakeven sales revenue?
A £165,000
B £250,000
C £300,000
D £366,667
C £300,000
A company has calculated its margin of safety to be 20% of budgeted sales. Budgeted sales are 5,000 units per month and budgeted contribution is £25 per unit.
What are the budgeted fixed costs per month?
A £25,000
B £100,000
C £125,000
D £150,000
B £100,000
Doer Ltd makes a single product, the Whizzo. This product sells for £15, and makes a contribution of £5 per unit. Total fixed costs per annum are £11,125.
If Doer Ltd wishes to make an annual profit of £11,875 how many Whizzos do they need to sell?
A 1,533units
B 2,225 units
C 2,375 units
D 4,600 units
D 4,600 units
Jackson plc expects a new venture to yield a gross profit of 50% on sales.
LO 4a
Fixed salary costs are expected to be £23,520 per month and other expenses are expected to be 8% of sales.
Calculate the sales revenue necessary to yield a monthly profit of £58,800.
A £56,000
B £140,000
C £164,640
D £196,000
D £196,000
Xena Ltd generates a 12% contribution on its weekly sales of £280,000. A new product, Z, is to be introduced at a special offer price in order to stimulate interest in all the company's products, resulting in a 5% increase in weekly sales of the company's other products. Product Z will incur a variable unit cost of £2.20 to make and £0.15 to distribute. Weekly sales of Z, at a special offer price of £1.90 per unit, are expected to be 3,000 units.
The effect of the special offer will be to increase the company's weekly profit by:
A £330
B £780
C £5,700
D £12,650
A £330
JJ Ltd manufactures a product which has a selling price of £14 and a variable cost of £6 per unit. The company incurs annual fixed costs of £24,400. Annual sales demand is 8,000 units.
New production methods are under consideration, which would cause a 30% increase in fixed costs and a reduction of £1 in the variable cost per unit. The new production methods would result in a superior product and would enable the sales price to be increased to £15 per unit.
If the organisation implements the new production methods and wishes to achieve the same profit as that under the existing method, the number of units to be produced and sold annually would be
A 3,960
B 4,755
C 7,132
D 8,915
C 7,132
Which two of the following statements about traditional breakeven charts are correct?
A The fixed costs are depicted by a straight line parallel to the vertical axis.
B The sales revenue line passes through the origin.
C The total cost line cuts the vertical axis at the point which is equal to the period fixed costs.
D The breakeven point is the point where the sales revenue line crosses the fixed cost line.
B The sales revenue line passes through the origin.
C The total cost line cuts the vertical axis at the point which is equal to the period fixed costs.
When using limiting factor analysis in order to calculate maximum profit, which three of the following assumptions should be made?
A Fixed costs per unit are not changed by increases or decreases in production volume.
B Fixed costs in total are not changed by increases or decreases in production volume.
C Variable costs per unit are not changed by increases or decreases in production volume.
D Variable costs in total are not changed by increases or decreases in production volume.
E Estimates of sales demand, prices and resources required for each product are known
with certainty.
B. Fixed costs in total are not changed by increases or decreases in production volume.
C. Variable costs per unit are not changed by increases or decreases in production volume.
E. Estimates of sales demand, prices and resources required for each product are known
with certainty.
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