1 Cunningham Inc sells MP3 players for 60 each Variable cost

1. Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit,and fixed costs total $120,000. What sales are needed by Cunningham to break even? A) $360,000 B) $480,000. C) $300.000. D) $160,000. 2. Two costs at Bradshaw Company appear below for specific months of operation. Month October October Amount Delivery costs September 40.000 55,000 S 40,000 t Produced 40,000 60,000 40,000 60,000 September 84,000 126,000 Utilities Which type of costs are these? A) Utilities are mixed and delivery costs are variable. B) Delivery costs and utilities are both variable. C) Delivery costs are mixed and utilities are variable. D) Delivery costs and utilities are both mixed.

Solution

1. A) $360,000

CM per unit = Unit Selling price – Variable cost = $60 - $40 = $20/unit

BE point in units = FC ÷ CM per unit = 120,000 ÷ 20 = 6,000

BE point in sales = BE point in units * unit selling price = 6,000 * 60 = $360,000

2. C) Delivery costs are mixed and utilities are variable.