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CHAPTERS 4 AND 5 QUIZ (V2)

1. Following is the GAAP income statement for Johnson and Jr., who makes a single product: Revenue $574,000 Cost of Goods Sold: Direct Materials $193,000 Direct Labor 65,000 Production Supplies 13,000 Building Rent 80,000 Equipment Depreciation 9,000 Total 360,000 Gross Margin $214,000 Management, Marketing and Administration: Management Salaries $115,000 Advertising 29,000 Sales Commissions 38,000 Office Rent 17,000 Total 199,000 Profit Before Taxes $15,000 Johnson and Jr. sold 20,000 units. What is the variable cost per unit? Round your answer to the nearest penny. A. $15.22 B. $16.63 C. $13.37 D. $15.45 2. D&C Company manufacturing piping. At a volume of 20,000 units, per-unit price and cost data for the year just ended follow: Item Value per Unit Selling Price $100 Variable manufacturing costs $30 Fixed manufacturing costs $15 Gross Margin $35 Variable selling costs $ 5 Fixed selling and administrative costs $10 Profit Margin $20 Required What is D&C Company's breakeven point?

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3. The Bolger Corporation has the capacity to produce 50,000 straw hats with its present facilities. There are no beginning or ending inventories. The following information is available: Total revenue $1,200,000 Unit selling price $35 Unit variable production costs $10 Unit variable selling and administrative costs $5 Total fixed production costs $128,000 Total fixed selling and administrative costs $56,000 Lahr Company wants to buy 10,000 straw hats but cannot spend more than $15 per hat. Since Lahr Co. found Bolger Corp. over the Internet, Bolger will not pay sales commissions of $3 per hat if the sale is made, as it otherwise would. Should Bolger sell the hats to Lahr Company for $15 per hat? A. No, the offered price is half the normal selling price and Bolger Corp. would lose $26,000 operating income. B. Cannot be determined since we dont know if Bolger Corp. has enough excess capacity to produce an additional 10,000 hats. C. Yes, Bolger Corp.s contribution margin will increase by $30,000 total. D. Yes, Bolger Corp. will earn $.80 contribution margin on each hat sold.

4. Suppose Max's Shuttle Service wants to earn a profit before taxes of $350,000 in the coming year. Max's selling price is $40, its variable cost per unit is $10, and its fixed costs are $100,000. How many tickets must the company sell? A. 26,520 B. 26,250 C. 18,750 D. 15,000

5. If revenues are $250,000, breakeven revenues are $185,000, and fixed costs are $50,000, the margin of safety is A. 33.3% B. 44.4% C. 26.0% D. 22.2%