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12. Given the following information, what is the company’s cash break-even point?
Revenue
$ 3,700,000
Total variable costs
$ 2,300,000
Total fixed costs
$ 1,100,000, including depreciation
Depreciation
$ 100,000
Answer $ 2,642,857
14. Given the following information, what is the PV ratio?
Variable cost per unit
$100
Unit selling price per unit
$200
Answer 0.50
16. Given the following information, what is the contribution margin?
Revenue
$1,000,000
Direct material
500,000
Direct labour
250,000
Manufacturing overhead
150,000
Administration overhead
50,000
Answer $ 250,000
17. An entrepreneur is absolutely certain his new company will sell 10,000 units. He has already determined the break-even point is 3,000 units. Should he launch the company, and why or why not?
Launch the company because there is little risk since the break-even point is well below expected sales.
18. A company wants to make a $10,000 profit by selling 500 units, without changing the selling price. By how much should the fixed costs be reduced?
Selling price per unit
$300
Variable cost per unit
$100
Total fixed costs
$100,000
Answer $ 10,000
19. Given the following information, what is the required number of units that must be sold?
Selling price per unit
$300
Variable cost per unit
$100
Total fixed costs
$100,000
Profit objective
$10,000
Answer 550 units
20. When is the profit break-even point achieved? When the contribution margin covers all costs and the profit objective.
21. How is the contribution margin calculated?
by subtracting variable costs from revenue
