Question

1. Putnam Company…. Below is an income statement for Putnam Company:

Sales	$600,000
Variable costs	(192,000)
Contribution margin	$408,000
Fixed costs	(300,000)
Profit before taxes	$108,000

What was Putnam’s margin of safety expressed as a percentage of sales? Round your answer to 4 decimal places and choose the closest answer.

	A.	26.47%
	B.	42.05%
	C.	18.75%
	D.	33.33%

2. Putnam Company

Below is an income statement for Putnam Company:

Sales	$600,000
Variable costs	(192,000)
Contribution margin	$408,000
Fixed costs	(300,000)
Profit before taxes	$108,000

If we assume that there is no change in fixed costs, what will be the expected net income on sales of $920,000?

	A.	$287,500
	B.	$325,600
	C.	$337,500
	D.	$302,000

3. The following information relates to financial projections of Stewart Company:

Projected sales	60,000 units
Projected variable costs	$3.00 per unit
Projected fixed costs	$40,000 per year
Projected unit sales price	$7.00

If Stewart Company's tax rate is 40%, how many units would Stewart Company need to sell (target income volume) to earn an after-tax profit of $8,000? Choose the closest answer.

	A.	10,667
	B.	13,077
	C.	13,333
	D.	15,000

4. Putnam Company

Below is an income statement for Putnam Company:

Sales	$600,000
Variable costs	(192,000)
Contribution margin	$408,000
Fixed costs	(300,000)
Profit before taxes	$108,000

Based on the cost and revenue structure on the income statement, what was Putnam’s break-even point in dollars? Choose the cl
osest answer.
A.
$400,000
B.
$441,177
C.
$425,750
D.
$473,230

5. A sales manager has used the probabilistic budget to estimate sales revenue for the coming year. This sales manager assigned the following probabilities to expected sales for the coming year:

Probability	Expected Sales
40%	$2,600,000
35%	3,750,000
25%	1,800,000

What will be the comany's probable sales in the coming year?

	A.	$2,750,200
	B.	$2,802,500
	C.	$2,568,000
	D.	$2,687,500

6 .K-Too Everwear Corporation manufactures two styles of mountain climbing shoes for women: Regular and fashion styles. A pair of regular style shoes sells for $135, while the fashion style shoes sell for $160 per pair. The variable cost per pair for regular shoes is $38.94, and that for fashion style shoes is $41.5. K-Too Everwear has fixed costs of $1,800,000. K-Too Everwear has the sales mix of 60% and 40% for regular- and fashion-style shoes, respectively. What is K-Too Everwear’s weighted average contribution margin ratio? Please round your calculations to 4 decimal places and choose the closest answer.

A.
72.95%

B.
72.32%

C.
73.45%

D.
71.92%

Answer 1

1) answer : A. 26.47%

BEP (in $) = 300000 / 68% = 441176

MOS = Sales - BEP = 600000 - 441176 = 158824

MOS as Sales percentage = 158824/600000= 26.47%

2) answer: B. $325600

CM = 408000/600000=68%

NI = 920000 * 68% - 300000 = 325600

3) answer : C. 13333 units

Total contribution required = 40000+(8000/0.6)=53333.33

sales volume required = contri reqd./ contri per unit

53333.33/(7-3) = 13333.33

4) answer : B. $441177

Contribution margin = 408000/600000 = 68%

BEP ( in $) = FC/CM = 300000 / 68% = $441177

5) answer: B. $2802500

2.6*0.4+3.75*0.35+1.8*0.25 = 2.8025m

6) answer : A. 72.95%

(0.6*(135-38.94)/135)) + (0.4*(160-41.5)/160))

(0.6*(135-38.94)/135)) + (0.4*(160-41.5)/160))

0.43+0.30=0.73 or 72.95%