Question

1. Maruska Corporation has provided the following data concerning its only product:

Selling Price Per Unit	$ 180
Current Sales (Units)	29,800
Break-Even Sales (Units)	25,032

  
What is the margin of safety in dollars?

		$4,505,760
		$858,240
		$3,576,000
		$5,364,000

2.

Hettrick International Corporation's only product sells for $120.00 per unit and its variable expense is $52.80. The company's monthly fixed expense is $396,480 per month. The unit sales to attain the company's monthly target profit of $13,000 is closest to:

7,755

6,093

5,753

3,412

3.

Inspection costs at one of Ratulowski Corporation's factories are listed below:

	Units Produced	Inspection Cost
April	777	$ 10,176
May	807	10,404
June	798	10,355
July	835	10,665
August	822	10,542
September	795	10,313
October	805	10,409
November	853	10,795
December	796	10,310

  
Management believes that inspection cost is a mixed cost that depends on units produced.
  
Using the high-low method, the estimate of the variable component of inspection cost per unit produced is closest to:

$8.14

$7.05

$0.12

$12.89

4.

Variable expenses for Alpha Corporation are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year:

$250,000

$375,000

$600,000

$150,000

5.

Match each of the following definitions with the correct term.

-       A.       B.       C.	The point where total sales equals total expenses.
-       A.       B.       C.	A method of computing the break-even point that relies on the equation Sales = Variable expenses + Fixed expenses + Profits.
-       A.       B.       C.	The relative proportions in which a company's products are sold.

A.	Break-Even Point
B.	Equation Method
C.	Sales Mix

Answer 1

Q1.
Answer is $ 858240
Margin of safety in units = Actual sales-Break even
		29800-25032 = 4768 units
Margin of safety in $ = 4768*180= 858240
Q2.
Answer is 6093
CM ratio = 67.20/120 *100 = 56%
Desired contribution = 396480+13000 = 409480
Required sales = 409480/56% = 731214
Requirred sales units = 731214/120 = 6093
Q3.
Answer is   $ 8.14
		Cost	Units
High-Nov		10795	853
Low -April		10176	777
Change		619	76
VC per unit = 619 /76 = 8.14
Q4.
Answer is $ 250000
CM ratio = 100-40% = 60%
Break even sales in $ = Fixed cost / CM ratio
		150000/60% = 250000
Q5.
Answer is A, B And C