1 Maruska Corporation has provided the following data concer

1. Maruska Corporation has provided the following data concerning its only product:

  
What is the margin of safety in dollars?

$4,505,760

$858,240

$3,576,000

$5,364,000

2.

Hettrick International Corporation\'s only product sells for $120.00 per unit and its variable expense is $52.80. The company\'s monthly fixed expense is $396,480 per month. The unit sales to attain the company\'s monthly target profit of $13,000 is closest to:

7,755

6,093

5,753

3,412

3.

Inspection costs at one of Ratulowski Corporation\'s factories are listed below:

  
Management believes that inspection cost is a mixed cost that depends on units produced.
  
Using the high-low method, the estimate of the variable component of inspection cost per unit produced is closest to:

$8.14

$7.05

$0.12

$12.89

4.

Variable expenses for Alpha Corporation are 40% of sales. What are sales at the break-even point, assuming that fixed expenses total $150,000 per year:

$250,000

$375,000

$600,000

$150,000

5.

Match each of the following definitions with the correct term.

The point where total sales equals total expenses.

A method of computing the break-even point that relies on the equation Sales = Variable expenses + Fixed expenses + Profits.

The relative proportions in which a company\'s products are sold.

Break-Even Point

Equation Method

Sales Mix

Solution

(1) MOS units = 29800 – 25032 = 4768

    MOS ($) = 4768 * $ 180 = $ 858240

(2) Sale – VC – FC = Profit

Let x be the units sold

(120 – 52.80) * x – 396480 = 13000

X = 6093 units

(3) High low method

April units sold = 777 is low component

November units sold = 853 is high component

VC pu = (10795 – 10176)/(853-777) =$ 8.14

(4) BEP = Fixed cost/contribution margin

     = cont margin = 100 – Variable percentage

     = 100 – 40 = 60%

= 150000/60% = $ 250000

(5) The point where total sales equals total expenses. = Break-Even Point

    A method of computing the break-even point that relies on the equation Sales = Variable expenses + Fixed expenses + Profits. = Equation Method

The relative proportions in which a company\'s products are sold = Sales Mix