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41.Consider the following information about the Gumm Company: Budgeted SalesUnit Contribution
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# Question : 41.Consider the following information about the Gumm Company: Budgeted SalesUnit Contribution : 1416287

41.Consider the following information about the Gumm Company:

Budgeted SalesUnit Contribution Margin

Mint gum6,000 cases\$2.00

Bubble gum4,000 cases\$2.50

Budgeted fixed costs are \$550,000.  The break-even number of cases for the mint gum is:

a.250,000

b.100,000

c.132,000

d.150,000

42.The margin of safety is the amount:

a.by which the sales price per unit exceeds the variable cost per unit.

b.that the contribution margin exceeds fixed cost.

c.by which the profit calculated under absorption costing exceeds the profit calculated under variable costing.

d.that sales can decrease before the company will suffer a loss.

43.The  Company is planning to sell Product Z for \$10 a unit.  Variable costs are \$6 a unit and fixed costs are \$100,000.  If the company is currently selling 30,000 units, what is the margin of safety in units?

a.5,000

b.10,000

c.25,000

d.20,000

44.The Blue Saints Band is holding a concert in Toronto.  Fixed costs relating to staging a concert are \$350,000.  Variable costs per patron are \$5.00.  The selling price for a tickets \$25.00.  The Blue Saints Band has sold 23,000 tickets so far.

At the current level of sales, what is the margin of safety in dollars?

a.\$137,500

b.\$87,500

c.\$180,000

d.\$115,000

45.Consider the income statement for Pickbury Farm:

Sales\$500,000

Variable costs350,000

Contribution margin150,000

Fixed costs80,000

Net income\$ 70,000

What is the margin of safety ratio (to the nearest percentage point)?

a.47%

b.70%

c.30%

d.88%

46.The Blue Saints Band is holding a concert in Toronto.  Fixed costs relating to staging a concert are \$350,000.  Variable costs per patron are \$5.00.  The selling price for a tickets \$25.00.  The Blue Saints Band has sold 23,000 tickets so far.

At the current level of sales, what is the margin of safety ratio?

a.20.0%

b.23.9%

c.15.2%

d.31.3%

47.The Blue Saints Band is holding a concert in Toronto.  Fixed costs relating to staging a concert are \$350,000.  Variable costs per patron are \$5.00.  The selling price for a tickets \$25.00.  The Blue Saints Band has sold 23,000 tickets so far.

How many tickets does the Blue Saints Band need to sell to achieve net income of \$50,000 after income tax, assuming the income tax rate is 50%?

a.2,500

b.18,000

c.22,500

d.17,500

48.The difference in cost between two alternatives, such as to make a component part of a final product versus buying the part from an outside supplier is called:

a.Variable cost.

b.Differential cost.

c.Product cost.

d.Indirect cost.

49.Donellan Company produces a special gear used in automatic transmissions.  Each gear sells for \$30, and the company sells approximately 500,000 gears each year.  Unit cost data for the year follows:

Direct material\$9.00

Direct labor8.00

Other costs:VariableFixed

Manufacturing\$3.00\$7.00

Distribution5.003.00

Donellan has received an offer from a foreign manufacturer to purchase 25,000 gears.  Domestic sales would be unaffected by this transaction.  If the offer is accepted, variable distribution costs will increase \$1.00 per gear for insurance, shipping, and import duties.  The relevant unit cost to a pricing decision on this offer is:

a.\$18.00.

b.\$20.00.

c.\$24.00.

d.\$26.00.

50.Bradley Inc. has the capacity to make 100,000 windows.  Bradley is currently operating at 80% capacity.  The windows usually sell for \$20.00 each.  Costs for each window follow:

Direct materials\$ 5.00

Direct labor3.00

Variable factory overhead2.00

Fixed factory overhead4.00

Total\$14.00

The Army has offered to buy 10,000 windows for \$12.00 each for barracks.  Bradley should:

a.Reject the offer because it currently does not have enough capacity to accept the order.

b.Reject the order because the company will lose \$20,000 on the order.

c.Accept the offer because the company will realize \$20,000 in additional contribution margin.

d.Accept the offer because the company will realize \$40,000 in additional contribution margin.

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