Reading 29: Capital Structure and Leverage LOS d～ Q1-5

levels, company, quantity, determine, net

LOS d: Calculate the breakeven quantity of sales and determine the company's net income at various sales levels.

Q1. Given: price = $35 per unit, variable cost = $15 per unit, and total cost = $200,000. If sales equal 10,000 units, what is the firm's breakeven sales quantity?

A) 1,750 units.

B) 3,000 units.

C) 2,500 units.

Q2. Jayco, Inc. has a division that makes red ink for the accounting industry. The unit has fixed costs of $10,000 per month, and is expected to sell 40,000 bottles of ink per month. If the variable cost per bottle is $2.00 what price must the division charge in order to breakeven?

A) $2.50.

B) $2.75.

C) $2.25.

Q3. Annah Korotkin is the sole proprietor of CoverMeUp, a business that designs and sews outdoor clothing for dogs. Each year, she rents a booth at the regional Pet Expo and sells only blankets. Korotkin views the Expo as primarily a marketing tool and is happy to breakeven (that is, cover her booth rental). For the last 3 years, she has sold exactly enough blankets to cover the $750 booth rental fee. This year, she decided to make all blankets for the Expo out of high-tech waterproof/breathable material that is more expensive to produce, but that she believes she can sell for a higher profit margin. Information on the two types of blankets is as follows:

Per Unit	Last Year’s (Basic) Blanket	This Year’s (New) Blanket
Sales Price	$25	$40
Variable Cost	$20	$33

Assuming that Korotkin remains most interested in covering the booth cost (which has increased to $840), how many more or fewer blankets (new style) does she need to sell to cover the booth cost? To cover this year’s booth costs, Korotkin needs to sell:

A) 30 fewer blankets than last year.

B) 42 fewer blankets than last year.

C) 42 more blankets than last year.

Q4. Annual fixed costs at King Mattress amount to $325,000. The variable cost of raw materials and labor is $120 for the typical mattress. Sales prices for mattresses average $160. How many units must King Mattress sell to break even?

A) 40.

B) 8,125

C) 2,708.

Q5. Jayco, Inc., sells blue ink for $4.00 a bottle. The ink's variable cost per bottle is $2.00. Ink has fixed cost of $10,000. What is Jayco's breakeven point in units?

A) 5,000.

B) 2,500.

C) 6,000.

[此贴子已经被作者于2009-3-4 10:50:29编辑过]