Questions -
Q1. The income statement is part of which element of a company's master budget? Select one:
a. The operating budgets
b. The capital expenditures budget
c. The financial budgets
d. The cash budgets
Q2. Stewart's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $640,000 and a contribution margin of 80% of revenues. Compute Stewart's Steel Parts' monthly breakeven sales in dollars.
Q3. Why is it necessary to calculate a weighted-average contribution margin ratio for a multiproduct company when calculating the breakeven point for that company? Why can't all of the products' contribution margin ratios just be added together and averaged?
Q4. Brett Stenback is evaluating a business opportunity to sell grooming kits at dog shows.
Brett can buy the grooming kits at a wholesale cost of $37 per set. He plans to sell the grooming kits for $70 per set. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $759 per dog show. Determine the number of grooming kits Brett must sell per show to break even.
Q5. Rally Scooters plans to sell a motorized standard scooter for $50 and a motorized chrome scooter for $60. Rally Scooters purchases the standard scooter for $35 and the chrome scooter for $40. Rally Scooters expects to sell two chrome scooters for every three standard scooters. The company's monthly fixed expenses are $14,450. How many of each type of scooter must Rally Scooters sell monthly to break even?
Q6. Ghent Medical Supply is a retailer of home medical equipment. Last year, Ghent's sales revenues totaled $6,300,000. Total expenses were $2,200,000. Of this amount, approximately $1,260,000 were variable, while the remainder were fixed. Since Ghent's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. What is Ghent's contribution margin ratio?
Q7. Trendy Toes produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.Compute the contribution margin per package. Find the breakeven point in units.
Q8. Define breakeven point. Why is the breakeven point important to managers?
Q9. Ghent Medical Supply is a retailer of home medical equipment. Last year, Ghent's sales revenues totaled $6,300,000. Total expenses were $2,200,000. Of this amount, approximately $1,260,000 were variable, while the remainder were fixed. Since Ghent's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. What is Ghent's current operating income?
Q10. Trendy Toes produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.Compute the contribution margin per package.
Q11. Ghent Medical Supply is a retailer of home medical equipment. Last year, Ghent's sales revenues totaled $6,300,000. Total expenses were $2,200,000. Of this amount, approximately $1,260,000 were variable, while the remainder were fixed. Since Ghent's offers thousands of different products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. What is Ghent's breakeven point in sales dollars (Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by Ghent's actual sales mix.)
Q12. Elizabeth Miller sells homemade knit scarves for $14 each at local craft shows. Her contribution margin ratio is 62.5%. Currently, the craft show entrance fees cost Elizabeth $1,400 per year. The craft shows are raising their entrance fees by 25% next year. How many extra scarves will Elizabeth have to sell next year just to pay for rising entrance fee costs?
Find the number of scarves needed to breakeven on (or pay for) the extra entrance fee cost of $350 (= $1,400 × 25% increase).