IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 381:

  Cat fur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. Assume that Cat fur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to- one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability?

  A. The company is operating at the breakeven point.

  B. The company earned a profit.

  C. The company sustained a loss.

  D. Cannot be deterrence from the informant given.

  Correct Answer: B

  The expected sales mix is 40% for Product X and 60% for Product V. Given that Product X has a 40% contribution margin ratio and Product V has a 30% contribution margin ratio, selling more of Product X and less of Product V increases the average contribution margin ratio. The effect is to lower the breakeven point Thus, if the new composite unit includes 2 units of Product X and 2 units of Product V. the composite unit selling price is $80 [(2 x $10) + (2 x $30)]. and the composite UCM is $26 {J2 x ($10 --$6)] + (2 x ($30-- $21)D, The new breakeven point in composite units is therefore 11.53846 ($300,000 FC ?$26 UCM). and the new breakeven point in sales dollars is $923,077 (11.538.46 x $80) Given that sales reached the budgeted breakeven point of $942,857, Cat fur must have made a profit of $19,780 ($942,857 -- $923,077).

• Question 382:

  Cat fur Company has fixed costs of $300.000. It produces two products, X and Y Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. How many units of Product Y will Cat fur sell at the breakeven point?

  A. 8,571 units.

  B. 20.454 units.

  C. 23.377 units.

  D. 25,714 units.

  Correct Answer: D

  A composite unit was destined as consisting of 2 units of Product X and 3 units of roduct Y. The breakeven point in composite units is 8,571 A3. According, the units of Product V sold at the breakeven point are equal to 25.714(8.571.43 x 3).

• Question 383:

  Cat fur Company has fixed costs of $300,000. It produces two products, X and Y Product has a van able cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. What is Cat furs breakeven point in dollars?

  A. $300,000

  B. $750,000

  C. $857,142

  D. $942,857

  Correct Answer: D

  A helpful approach in a multiproduct situation is to make calculations based on the composite unit, i.e.. 2 units of Product X and 3 units of Product Y (a 66% ratio). The selling price of this composite unit is $110 [(2 $10) + (3 x $30)]. The UCM of the composite unit is $35 fJ2 x ($10-- $6)] + [3 x ($30-- $2 1)11. Consequently, the breakeven point in composite units is 8,571.43 ($300,000 FC. $35 UCM), and the breakeven point in sales dollars is $942,857 (8.571 43 x $110)

• Question 384:

  A company wants to open a new store in one of two nearby shopping malls. In Mall A. the rent will be $250 .000 per year. In Mall B. the rent will be 4% of gross revenues. Assuming that revenues and all other elements under consideration are the same for both malls, at what level of revenues will the company be indifferent between the two malls?

  A. $1 .000.000

  B. $4.000.000

  C. $6.250.000

  D. $12,500,000

  Correct Answer: C

  The level of indifference is calculated by setting the equation for the first mall (a flat $250,000) equal to the equation for the second mall. Solving for that equation involves dividing $250,000 by 4%. resulting in an indifference level of revenues of $6,250,000.

• Question 385:

  For one of its divisions, Buona Fortuna Company has fixed costs of $300,000 and a variable-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income of $90,000 per year from the division. How many units will Buona Fortuna have to sell to earn a pre-tax income of $90,000 per year?

  A. 65.000 units.

  B. 75.000 units.

  C. 77.250 units,

  D. 97,500 units.

  Correct Answer: D

  The breakeven point is calculated by dividing the fixed costs by the unit contribution margin in dollars To determine how many units need to be sold to yield a specific income, that income should be treated as a fixed cost. Thus, adding the $90,000 of desired income to the $300,000 of fixed costs results in a numerator of $390,000. Hence, the necessary unit sales equals 97.500 units [$390,000 + ($10 unit price -$6 unit variable cost)].

• Question 386:

  For one of its divisions, Buona Fortune Company has fixed costs of $300,000 and a van able-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income 01 $90,000 per year from the division. What is the breakeven point in dollars?

  A. $300,000

  B. $500,000

  C. $750,000

  D. $1,050,000

  Correct Answer: C

  Breakeven point is calculated by dividing the fixed costs ol $300,000 by the contribution margin percentage, which was 40%. Dividing $300,000 by .4 results in a breakeven point of $750,000.

• Question 387:

  A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. Its margin of safety is $40,000. What are the company's fixed costs?

  A. $72,000

  B. $80,000

  C. $288,000

  D. $320,000

  Correct Answer: A

  The margin of safety equals sales above the breakeven point. Thus, if the margin of safety is $40,000. the breakeven point in sales dollars must be $360,000. If the contribution margin rah is 20%, the contribution margin (sales -- variable costs) at the breakeven point is $72,000 ($360,000 x 20%). This amount must equal fixed costs because sales equal the sum of fixed and variable costs at the breakeven point.

• Question 388:

  A not-for-profit social agency provides home health care assistance to as many patients as possible s budgeted appropriation CX) for next year must cover fixed costs of $5 million. and the annual per-patient cost (Y) of its services. However, the agency is preparing for a possible 10% reduction in its appropriation that will lower the number of patients served from 5,000 to 4,000 The reduced appropriation and the annual per- patient cost equal

  

  A. Option A

  B. Option B

  C. Option C

  D. Option D

  Correct Answer: C

• Question 389:

  A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. s margin of safety is $40,000 What is the company's breakeven point?

  A. $360,000

  B. $320,000

  C. $288,000

  D. $80,000

  Correct Answer: A

  The margin of safety equals sales above the breakeven point. Thus, if the margin of safety is $40,000, the breakeven point must be $360,000 ($400,000 sales -- $40,000)

• Question 390:

  A manufacturing concern sells its sole product for $10 per unit, with a unit contribution margin of $6. The fixed manufacturing cost rate per unit is $2 based on a denominator capacity of 1 million units, and fixed marketing costs are $1.5 million. If 900,000 units are produced, the absorption-costing breakeven point in units sold is

  A. 425,000 units

  B. 583.333 units

  C. 900,000 units

  D. 1,000,000 units

  Correct Answer: A