Learning Objective 3-2

1) The term that is used to identify the quantity of output sold at which total revenues equal total costs and that quantity of output sold that results in $0 operating income is:

A) contribution margin.

B) breakeven point (BEP).

C) contribution margin per unit.

D) contribution margin percentage.

E) contribution income statement.

2) The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit.

Compute the breakeven quantity in units.

A) 266.55 units.

B) 275.77 units.

C) 277.77 units.

D) 288.88 units.

E) 299.99 units.

3) The Clock Store’s manager reported that there were 25 breakeven quantities in units and a selling price of $10 per unit. The manager needs to determine the breakeven revenues.

Required:

Compute the breakeven revenues.

A) $.25

B) $2.50

C) $25.00

D) $200.00

E) $250.00

4) The store has a contribution margin per unit of $90 and the products sells for $225. The manager needs to know the contribution margin percentage.

Required:

Compute the contribution margin percentage.

A) 2.5%

B) 40%

C) 45%

D) 245%

E) 250%

5) The manager at the store needs to determine the breakeven revenues associated with the new and dynamic power blender. The fixed costs associated with the blender are $3,000 and the contribution margin is 50%.

Required:

Compute the breakeven revenue.

A) $.16

B) $160

C) $6,000

D) $7,500

E) $15,000

6) Sunny Pastures reported the following information:

Fixed costs$3,000

Target Operating Income5,000

Contribution margin per unit90

Required:

Compute the quantity of units required to be sold to have an operating income of $5,000.

A) 24.44 units

B) 40.22 units

C) 64.44 units

D) 88.88 units

E) 94.44 units

7) The Vitamin Store reported the following information:

Fixed Costs$3,000

Operating income1,800

Contribution margin per unit.50

Required:

Compute the revenues needed to earn operating income of $1,800.

A) $1,400

B) $2,400

C) $4,800

D) $9,600

E) $10,200

8) Managers use ________ ________ ________ to understand how profits change with sales volume.

A) unit volume analysis

B) credit volume analysis

C) debit volume analysis

D) sales volume analysis

E) profit volume analysis

9) Management accountants calculate the breakeven point directly in terms of revenues using contribution margin percentages.

10) Managers only use the breakeven point to discover how much product they need to sell to avoid a loss.

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