TASK:
Malachite Company produces a single product. The selling price is $30 per unit, and variable costs amount to $21 per unit. Malachite's fixed costs per month total $45,000.
1. Refer to the above information. What is the contribution margin ratio of Malachite's product?
a. 70%.
b. 42.9%.
c. 30%.
d. 18%.
2. Refer to the above information. What is the monthly sales volume in dollars necessary to break even?
a. $150,000.
b. $13,500.
c. $64,286.
d. $45,000.
3. Refer to the above information. How many units must be sold each month to earn a monthly operating income of $18,000?
a. 420,000.
b. 2,000.
c. 2,100.
d. 7,000.
4. Refer to the above information. What will be the monthly margin of safety (in dollars) if 6,000 units are sold each month?
a. $54,000.
b. $30,000.
c. $135,000.
d. $126,000.
5. Refer to the above information. What will be Malachite's monthly operating income if 8,000 units are sold each month?
a. $90,000.
b. $72,000.
c. $195,000.
d. $27,000.
American Chemical Company (ACC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $10,000. The joint cost is allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $30,000, whereas product B1 can be sold for $50,000. Product A1 can be processed further to make product A2, at an incremental cost of $30,000. A2 can be sold for $75,000. Product B1 can be processed further to make product B2, at an incremental cost of $35,000. B2 can be sold for $70,000.
6. Refer to the information above. The net change in operating income resulting from a decision to manufacture product A2 is:
a. $11,250 (increase).
b. $11,250 (decrease).
c. $15,000 (decrease).
d. $18,750 (increase).
7. Refer to the information above. The net change in operating income resulting from a decision to manufacture product B2 is:
a. $16,250 (decrease).
b. $10,000 (decrease).
c. $3,750 (decrease).
d. $3,750 (increase).