Quiz 1: Attempt review | Akoraka

Started on	Sunday, 22 September 2024, 4:04 PM
State	Finished
Completed on	Sunday, 22 September 2024, 4:24 PM
Time taken	19 mins 58 secs
Grade	13.00 out of 15.00 (86.67%)

Question 1

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Company A wants to earn $5184 profit in the month of January. If their fixed costs are $10,000 and their product has a per-unit contribution margin of $250, how many units must they sell to reach their target income?

Round up your final answer to a whole number (i.e. no decimals), do not include any commas to separate thousands, and exclude the $ sign. e.g. write $1,234.12 as 1235 or write $-12.12 as -13

Answer:

Feedback

The formula used in this question is (Target profit+fixed cost)/per-unit contribution margin.

You need to round up to the whole number because the units cannot be sold apart or less.

The correct answer is: 61

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If a company has fixed costs of $6162 per month and their product that sells for $200 has a contribution margin ratio of 30%, how many units must they sell in order to break even?

Round up your final answer to a whole number (i.e. no decimals), do not include any commas to separate thousands, and exclude the $ sign. e.g. write $1,234.12 as 1235 or write $-12.12 as -13

Answer:

Feedback

The formula used in this question is Fixed cost/(sell price* contribution margin ratio). You need to round up to the whole number because the units cannot be sold apart or less.

The correct answer is: 103

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If the variable costs are $50 000 when a company makes 10 000 units, the variable cost per unit when 7000 units are produced is $5.00.

Select one:

True

False

Feedback

Variable cost per unit is constant but total variable costs increase or decrease with changes in production volume. The variable cost per unit is $50 000 / 10 000 = $5.00 per unit. At 7000 units, the variable cost per unit remains unchanged at $5.00 per unit.

The correct answer is 'True'.

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An organisation has a selling price per unit of $25, variable costs per unit of $15, and fixed costs of $45 000. How many units must be sold to generate a before-tax profit of $50 000?

Select one:

9500

2375

3800

6334

Feedback

Your answer is correct.

Feedback: Units to reach target before-tax profit = (fixed costs + before-tax profit) / unit contribution margin, where unit contribution margin = selling price per unit – unit variable cost. Always round your answer up, as an organisation cannot sell part of a unit.

The correct answer is: 9500

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

For a fixed cost, as volume increases:

Select one:

the cost behaviour depends on the type of fixed cost involved

total fixed costs remain constant and fixed costs per unit increase

both total fixed costs and fixed costs per unit remain constant

total fixed costs remain constant and fixed costs per unit decrease

Feedback

Your answer is correct.

A fixed cost is a cost which, within certain activity levels, is unaffected by changes in the level of activity. For example, rent of a factory. Fixed costs per unit change as activity changes, but the total fixed cost does not change.

The correct answer is: total fixed costs remain constant and fixed costs per unit decrease

Question 6

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

The formula to calculate the sales revenue needed to generate a target before-tax profit is:

Select one:

(fixed costs + target before-tax profit) /unit contribution margin ratio

(total costs + target before-tax profit) / contribution margin ratio

(fixed costs + target before-tax profit) / unit contribution margin

(fixed costs + target before-tax profit) / contribution margin

Feedback

Your answer is incorrect.

Feedback: The sales revenue needed to generate a target before-tax profit can be computed by modifying the break-even formula. The target before-tax profit is added to fixed costs as both need to be covered by the contribution margin. The sales revenue is computed by dividing (fixed costs + target before-tax profit) by the unit contribution margin ratio. The contribution margin ratio is computed as contribution margin (per unit)/ sales revenue (per unit).

The correct answer is: (fixed costs + target before-tax profit) /unit contribution margin ratio

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An organisation has a selling price per unit of $30, variable costs per unit of $21, and fixed costs of $48 000. How many units must be sold to break-even?

Select one:

5334

2286

1600

5332

Feedback

Your answer is correct.

Feedback: Break-even point in units = fixed costs / unit contribution margin, where unit contribution margin = selling price per unit – unit variable cost. Always round your answer up, as an organisation cannot sell part of a unit.

The correct answer is: 5334

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Dividing total fixed costs by the contribution margin ratio yields break-even point in units.

Select one:

True

False

Feedback

Feedback: Dividing total fixed costs by the contribution margin ratio yields break-even point in sales dollars.

The correct answer is 'False'.

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The break-even point is that level of activity where:

Select one:

total revenue equals fixed cost

total revenue equals manufacturing cost

total revenue equals total cost

total revenue equals variable cost

Feedback

Your answer is correct.

Feedback: The break-even point is the level of activity or sales revenue that makes profit before tax $0. Profit is calculated as Sales revenue – variable costs – fixed costs. Thus, the break-even point occurs when total revenue equals total cost.

The correct answer is: total revenue equals total cost

Question 10

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

An organisation has a selling price per unit of $50, variable costs per unit of $20, and fixed costs of $42 000. How much sales revenue must be generated to break-even?

Select one:

$280 000

$70 000

$105 000

$140 000

Feedback

Your answer is incorrect.

Feedback: Break-even sales revenue = fixed costs / contribution margin ratio, where contribution margin ratio = contribution margin per unit / selling price per unit. Note that contribution margin = selling price per unit – unit variable cost.

The correct answer is: $70 000

Question 11

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following changes will affect the unit contribution margin?

Select one:

Changes in fixed cost

Changes in selling price per unit

Changes in variable cost per unit

Both changes in variable cost per unit AND changes in selling price per unit

Feedback

Your answer is correct.

Feedback: Contribution margin is the amount of sales revenue available after variable costs to cover fixed costs and provide profit to the company. It is computed as the difference between sales revenue and variable costs. Changes in one or both of these components will affect the contribution margin.

The correct answer is: Both changes in variable cost per unit AND changes in selling price per unit

Question 12

Correct

Mark 3.00 out of 3.00

Flag question

Question text

For each of the following changes, indicate whether there will be an increase or decrease the break-even point in units.

Unit contribution margin decrease	Answer 1 Question 12
Variable cost per unit decreases	Answer 2 Question 12
Sales revenue per unit decreases	Answer 3 Question 12
Variable cost per unit increases	Answer 4 Question 12
Sales revenue per unit increases	Answer 5 Question 12
Unit contribution margin increases	Answer 6 Question 12

Feedback

Your answer is correct.

Feedback: The break-even point in units is computed as fixed costs / (unit sales revenue – unit variable cost). Changes in one, or more, components will change the break-even point. Break-even point will increase if sales revenue per unit decreases, or costs increase.

The correct answer is: Unit contribution margin decrease → Increase, Variable cost per unit decreases → Decrease, Sales revenue per unit decreases → Increase, Variable cost per unit increases → Increase, Sales revenue per unit increases → Decrease, Unit contribution margin increases → Decrease

Question 13

Correct

Mark 1.00 out of 1.00

Flag question

Question text

One of the assumptions in cost-volume-profit (CVP) analysis is that expenses can be categorised as fixed or variable.

Select one:

True

False

Feedback

There are a number of assumptions in CVP analysis including that the price of the product will remain constant as volume varies, all costs can be separated into fixed and variable costs, the total fixed cost does not change over the given volume range, and the per unit selling price and per unit variable cost do not change.

The correct answer is 'True'.