1.

Information about two products is as follows:

Product C
$20
11
$ 9

Selling price per unit

Variable costs per unit
Contribution margin per unit

Product D
$25
18
$ 7

The firm expects 60 percent of its sales (in units) to be Product C (a

sales mix of 6:4). Fixed costs are expected to be $82,000. Break-even in
units would be
Product C

Product D

a. 1,200 units
b. 2,460 units
c. 18,000 units
d. 6,000 units

800 units
1,312 units
14,000 units
4,000 units

Figure 1
Information about two products is as follows:
Product E
$40
15
$25

Selling price per unit

Variable costs per unit
Contribution margin per unit

Product Z
$65
45
$20

The firm expects 80 percent of its sales (in units) to be Product E (a

sales mix of 8:2). Fixed costs are expected to be $90,000.

2. Refer to Figure 1.

a.
b.
c.
d.

The break-even point in units would be

Product E

Product Z

600 units
3,000 units
4,000 units
8,000 units

150 units
750 units
1,000 units
2,000 units

3. Refer to Figure 1.

How many units of Product E should be sold if the

company is targeting a before-tax income of $120,000?
a. 875
b. 3,000
c. 3,875
d. 7,000
Figure 2
Lily Fan Company has three products: Economy, Standard, and Deluxe.
following information is available for the three products:

Selling price
Variable cost
Contribution margin
Expected sales
Fixed costs are $170,500.

Economy
$10
$ 8
$2
18,000

Standard
$20
$13
$7
12,000

The

Deluxe
$35
$24
$11
6,000

4. Refer to Figure 3.

Assuming the sales mix does not change, break-even

sales in dollars for Economy would be
a. $16,500
b. $357,500
c. $55,000
d. $165,000

5. Refer to Figure 3.

Assuming the sales mix does not change and if target

net income before tax for the coming year is $62,000, how many units of
Standard must be sold?
a. 11,000
b. 7,500
c. 15,000
d. 22,500

6. Refer to Figure 3. Lily Fan Company's margin of safety would be

a. $52,500
b. $60,000
c. There is no margin of safety; expected sales is less than breakeven sales.

d. none of the above

7. Kramer Company expects the following results this year:
Sales
Variable costs
Fixed costs
Expected production and sales

$300,000
$220,000
$50,000
2,000 units

The sales manager believes sales could be increased by 200 units if

advertising expenditures were increased by $6,000. If advertising
expenditures are increased and sales increase by 200 units, the effect on
operating income will be a(n)
a. increase of $24,000
b. decrease of $6,000
c. increase of $2,000
d. decrease of $3,000

8. Bell Company expects the following results this year:

Sales Price per unit
Variable Cost per unit
Fixed costs
Expected production and sales

$100
$53
$188,000
5,000 units

To improve quality, it will be necessary to increase variable costs by $2.

In addition, the sales manager believes sales could be increased by 500
units if advertising expenditures were increased by $14,500. If
advertising expenditures are increased, variable costs increase, and sales
increase by 500 units, the effect on operating income will be a(n)
a. increase of $2,000
b. decrease of $2,000
c. decrease of $14,500
d. decrease of $12,500