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Quiz #2 - Breakeven

The document discusses ten word problems related to break-even analysis and contribution margin. The first problem asks to calculate the ticket price needed for an event to breakeven given expected costs and number of attendees. The second asks how many unit sales are needed to earn a target profit given fixed expenses and contribution margin per unit. The third asks to calculate the contribution margin per unit for a product.

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Nelzen Garay
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84 views

Quiz #2 - Breakeven

The document discusses ten word problems related to break-even analysis and contribution margin. The first problem asks to calculate the ticket price needed for an event to breakeven given expected costs and number of attendees. The second asks how many unit sales are needed to earn a target profit given fixed expenses and contribution margin per unit. The third asks to calculate the contribution margin per unit for a product.

Uploaded by

Nelzen Garay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1. The Red Lions Brotherhood is planning its annual Riverboat Extravaganza.

The Extravaganza committee has assembled the


following expected costs for the event:
Dinner per person P 70
Programs and souvenir per person 30
Orchestra 15,000
Tickets and advertising 7,000
Riverboat rental 48,000
Floor show and strolling entertainment 10,000
The committee members would like to charge P300 per person for the evening’s activities. Assume that only 250 persons are
expected to attend the extravaganza, what ticket price must be charged to breakeven?
a. P 420 c. P 320
b. P 350 d. P 390

2. Consider the following:


Fixed expenses P 78,000
Unit contribution margin 12
Target net profit 42,000
How many unit sales are required to earn the target net profit?
a. 15,000 units c. 12,800 units
b. 10,000 units d. 20,000 units

3. Carribean Company produces a product that sells for P60. The variable manufacturing costs are P30 per unit. The fixed
manufacturing cost is P10 per unit based on the current level of activity, and fixed selling and administrative costs are P8 per
unit. A selling commission of 10% of the selling price is paid on each unit sold. The contribution margin per unit is:
a. P 24. c. P 30.
b. P 36. d. P 54.

4. Seal Yard Ornaments sells lawn ornaments for P 15 each. Seal's contribution margin ratio is 40%. Fixed costs are P 32,000.
Should fixed costs increase 30%, how many additional units will Seal have to produce and sell in order to generate the same net
profit as under the current conditions?
a. 1,600. c. 6,933.
b. 5,333. d. 1,067.

5. At a break-even point of 5,000 units sold, variable expenses were P 10,000 and fixed expenses were P 50,000. The profit from
the 5,001st unit would be?
a. P 10 c. P 15
b. P 50 d. P 12

6. Galactica Company has fixed costs of P 100,000 and breakeven sales of P 800,000. Based on this relationship, what is its
projected profit at P 1,200,000 sales?
a. P 50,000 c. P 150,000
b. P 200,000 d. P 400,000

7. The sales price per unit will increase from P 32 to P 40. The variable cost per unit will remain at P 24, and the fixed costs will
remain unchanged at P 400,000. How many fewer units must be sold to break-even at the new sales price of P 40 per unit?
a. 25,000 c. 10,000
b. 2,500 d. 12,500

8. The Hard Company sells widgets. The company breaks even at an annual sales volume of 80,000 units. At an annual sales
volume of 100,000 units the company reports a profit of P 220,000. The annual fixed costs for the Hard Company are:
a. P 880,000 c. P 800,000
b. P 1,100,000 d. P 1,000,000

9. Albatross Company has fixed costs of P 90,300. At a sales volume of P 360,000, the profit on sales is 10%; while, at a P 600,000
volume, the profit is 20%. What is the break-even volume?
a. P 225,000 c. P 301,000
b. P 258,000 d. P 240,000

10. An entity has fixed costs of P 200,000 and variable costs per unit of P 6. It plans on selling 40,000 units in the coming year. If
the entity pays income taxes on its income at a rate of 40%, what sales price must the firm use to obtain an after-tax profit of P
24,000 on the 40,000 units?
a. P 11.60 c. P 12.00
b. P 11.36 d. P 12.50

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