Problem 1. The breakeven point is the activity level where:
a. revenues equal fixed costs
b. contribution margin equals variable costs
c. revenues equal the sum of variable and fixed costs
d. revenues equal variable costs
Problem 2. When fixed costs are $100,000 and variable costs are 20% of the selling price, then breakeven sales are:
a. $100,000
b. $500,000
c. $125,000
d. indeterminable
Problem 3. Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
What is the contribution margin per ticket package?
a. $50
b. $100
c. $150
d. $200
Problem 4. If unit outputs exceed the breakeven point:
a. total sales revenue exceeds total costs
b. there is a profit
c. there is a loss
d. Both total sales revenue exceeds total costs and there is a profit.
Problem 5. Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
How many ticket packages will Ruben need to sell to break even?
a. 34 packages
b. 50 packages
c. 100 packages
d. 150 packages
Problem 6. Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
How many ticket packages will Ruben need to sell in order to achieve $60,000 of operating income?
a. 367 packages
b. 434 packages
c. 1,100 packages
d. 1,300 packages
Problem 7. Ruben intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $150 each. The round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben for any unsold ticket packages. Fixed costs include $5,000 in advertising costs.
For every $25,000 of ticket packages sold, operating income will increase by:
a. $6,250
b. $12,500
c. $18,750
d. an indeterminable amount