P1 Chapter 7 Quiz

From the options below, select the most complete and accurate definition of “the margin of safety”.

Jazzo Ltd sells three products. The budgeted fixed cost for the period is $235,000. The budgeted contribution to sales ratio (C/S ratio) and sales mix are as follows:

L Plc sells three products, details of which are as follows:

If the yearly fixed cost is £1,000,000, the yearly breakeven sales revenue, to the nearest £1, will be:

What does the line labelled Y represent in the breakeven chart presented below?

HG plc manufactures four products. The unit cost, selling price and bottleneck resource details per unit are as follows:

Assuming that labour is a unit variable cost, if budgeted unit sales are in the ratio W:2, X:3, Y:3, Z:4 and monthly fixed costs are budgeted to be £15,000, the number of units of W that would be sold at the budgeted breakeven point is nearest to:

From the options below, select what is represented by the vertical intercept on a P/V chart.

(i) Maximum loss possible
(ii) Total Fixed costs
(iii) Breakeven point
(iv) Zero sales volume

A company’s summary budgeted operating statement is as follows:

– Revenue: $200,000
– Variable costs: $120,000
– Fixed costs: $50,000
– Profit: $30,000

Assuming that the sales mix does not change, the percentage increase in sales volume that would be needed to increase the profit by $20,000 is:

T Inc. has invested $60,000 in new machinery for a new product. They are a publicly traded company and they have a cost of capital of 12%. The product they plan to make is a handheld mini welder and would be an innovative product in the market. Market research has shown that there is a demand for such a product, since there is a gap as a result of unfulfilled consumer needs. 

As such, the market research team believes they will be able to price these mini welders at an RRP of $80 per unit. Production is due to begin next week, and the production manager feels that as it is a completely new product, production may be slow to begin with. The company thinks that the variable cost per unit will be around $50.

Given the information above, T Inc. must produce and sell  units in order to break even (input answer without commas).

From the options below, select the factors whose changes affect future profit in the context of CVP analysis.

From the options below, choose how a decrease in fixed costs will affect the point at which the profit line intersects the vertical axis in a P/V graph

Fowler Ltd sells three products: D, E and F. The products are sold in the proportions D:E:F = 1:2:4.

Monthly fixed costs are €42,500 and product details are as follows:

The company wishes to earn a profit of €36,160 next month. What is the required sales value of product D in order to achieve this target profit?