Question

Exam #2 Review I. Which of the following would not affect the units required to break-even? a. number of units actually sold b. variable expense per unit e. total fixed expense d. selling price per unit 2. Which of the following would be more likely produce a labor efficiency variance? a. Using less expensive direet materials b. Use of persons with high wage rates in tasks that normally call for minimum wage employees c. Using untrained workers d. Higher overhead costs e. Annual bonuses paid to production supervisors At a brcak-even point of 500 units sold, White Corporation's variance expenses are $10,000. What will the corporation's net operating profit be at a volume ot 3. expenses are $6,000 and its fixed 501 units? a S1S b. $10 c. $20 d. $25 e. $5 Which of the following is NOT a conrect definition of Break-Even point? a. The point where total sales equals total expenses b、 There point where total profit equals total fixed expenses c. The point where total contribution margin equals total fixed expenses d. the point where total profit equals zero e. all are correct definitions of break-even point 4. 5. The contribution margin ratio is equal to: a. Total Manufacturing expenses divided by sales b. (Sales Variable Expenses)/Sales c. 1-(Gross Margin/Sales) d. 1-(Contribution Margin/Sales) e. Fixed Cost/ Sales My Company sells a single product If the seilling pice per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, hea; 6. margin per unit margin ratio in unts A) Increases Increases Decreases B) No change No change No change C) No change Increases No change D) Increases No change Decreases a. A b.В c. C d. D

Answer 1

Q1	For calculating Break even point we need the Fixed cost and contribution Margin
	So we do not require the Units sold
	So option a
Q2	The labor efficiency variance measures the ability to utilize labor in accordance with expectations
	This variance is calculated as the difference between the actual labor hours used to produce an item and the standard amount that should have been used, multiplied by the standard labor rate.
	So if an untrainded workers is used then he will take more hours and it will effect the efficiency of work
	So option c
Q3	Break even point	=	Fixed cost/Sales price per unit - Variable cost per unit
	500	=	$10,000/Sales price per unit - $12
	Sales price per unit	=	$32
	So contribution Margin	=	$32 - $12	$20
	At 501 units Contribution Margin	=	$10,020
	(501*$20)
	Fixed cots	=	$10,000
	Profit	=	$20
	So option c
Q4	Option b is not a correct definition of Break-even Point
	The Break-even Point is a point where the profit is ZERO
Q5	Contribution Margin Ratio	=	Contribution Margin/Sales
			OR
		=	Sales - Variable expense/Sales
Q6	Solve it by an example where Fixed cost is same at $10,000
		Normal	10% increase from normal
	Sales	10	11
	Variable cost	6	6.6
	Contribution Margin per unit	4	4.4
	Contribution Margin Ratio	40%	40%
	Break-even unit	2500	2272.73
	By the above example it clear that answer is option d