# Quiz: Variable Cost and Contribution Margin

Pages: 4 (1007 words) Published: October 7, 2010
Quiz – Chapter 17 – Solution 1. Rider Company sells a single product. The product has a selling price of \$40 per unit and variable expenses of \$15 per unit. The company's fixed expenses total \$30,000 per year. The company's break-even point in terms of total dollar sales is: A) \$100,000. B) \$80,000. C) \$60,000. D) \$48,000. The answer is d. CMR = (P-V)/P = (\$40 - \$15)/\$40 = 62.5% Px = F/ (CMR) Px = \$30,000/.625 = \$48,000 Use the following to answer questions 2-3: Weiss Corporation produces two models of wood chairs, Colonial and Early American. The Colonial sells for \$60 per chair and the Early American sells for \$80 per chair. Variable expenses for each model are as follows: Colonial \$35 9 Early American \$48 8

Variable production cost per unit ....... Variable selling expense per unit .......

Total fixed expenses are \$39,600 per month. Expected monthly sales are: Colonial, 1,800 units; Early American, 600 units. 2. The contribution margin per chair for the Colonial model is: A) \$51. B) \$16. C) \$35. D) \$25. The answer is b. CM = P-V = \$60 - \$35 - \$9 = \$16.

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3. If the sales mix and sales units are as expected, the break-even in sales dollars is closest to: A) \$132,000. B) \$148,500. C) \$143,000. D) \$139,764. Price: Variable Costs: Contribution Margin: Contribution Margin Ratio: The answer is c. Colonial to Early American Sales Mix: 3:1 Weighted Average Contribution Margin Ratio: .75(.2667) +.25(.30)= .20 +.075=.275 PX = F/CMR = \$39,600/.275 = \$144,000 Weighted Average Contribution Margin: .75(16) + .25(24) = 12+6 = \$18 X = F/CMU = \$39,600/\$18 = 2,200 units Colonial Sales Revenue: Early American Revenue: .75(2,200) = 1,650 x \$60 = .25(2,200) = 550 x \$80 = \$99,000 44,000 \$143,000 Colonial \$60 -44 \$16 26.67% Early American \$80 -56 \$24 30%

Use the following to answer questions 4-5: Southwest Industries produces a sports glove that sells for \$15 per pair. Variable expenses are \$8 per pair and fixed expenses are \$35,000 annually. 4. The break-even...