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Questions and Answers
A company has actual sales of 500 units and a break-even point of 300 units. What is the margin of safety in units?
A company has actual sales of 500 units and a break-even point of 300 units. What is the margin of safety in units?
- 100 units
- 800 units
- 200 units (correct)
- 300 units
The margin of safety percentage is calculated by dividing the budgeted sales by the break-even sales.
The margin of safety percentage is calculated by dividing the budgeted sales by the break-even sales.
False (B)
What two components constitute prime cost?
What two components constitute prime cost?
Raw Materials and Direct Labour
Contribution is calculated as Sales - ______.
Contribution is calculated as Sales - ______.
Match the following terms with their correct formulas:
Match the following terms with their correct formulas:
A company has a selling price of $50 per unit and variable costs of $30 per unit. What is the contribution per unit?
A company has a selling price of $50 per unit and variable costs of $30 per unit. What is the contribution per unit?
Profit is calculated as Fixed Costs minus Contribution.
Profit is calculated as Fixed Costs minus Contribution.
State the formula for calculating the break-even point in currency.
State the formula for calculating the break-even point in currency.
Target Profit in Units equates to (Fixed Costs + Target Profit) / ______.
Target Profit in Units equates to (Fixed Costs + Target Profit) / ______.
Which of the following is the correct formula for calculating the margin of safety percentage?
Which of the following is the correct formula for calculating the margin of safety percentage?
The overhead allocation rate includes only direct labor hours in its calculation.
The overhead allocation rate includes only direct labor hours in its calculation.
If a company's fixed costs are $50,000 and its contribution per unit is $25, what is the break-even point in units?
If a company's fixed costs are $50,000 and its contribution per unit is $25, what is the break-even point in units?
Prime Cost can be calcualted by adding Raw Materials to ______.
Prime Cost can be calcualted by adding Raw Materials to ______.
If a company has a break-even point of 1,000 units and a selling price of $75 per unit, what is the break-even point in currency?
If a company has a break-even point of 1,000 units and a selling price of $75 per unit, what is the break-even point in currency?
Contribution per unit is Selling Price plus Variable costs.
Contribution per unit is Selling Price plus Variable costs.
How do you calculate overhead allocation rate?
How do you calculate overhead allocation rate?
To calculate profit, you must subtract Fixed Costs from ______.
To calculate profit, you must subtract Fixed Costs from ______.
What is the formula for Target Profit in units?
What is the formula for Target Profit in units?
Margin of safety can only be expressed in units, not as a percentage.
Margin of safety can only be expressed in units, not as a percentage.
What is contribution?
What is contribution?
Flashcards
Margin of Safety (units)
Margin of Safety (units)
The difference between actual sales and break-even sales, measured in units.
Margin of Safety (%)
Margin of Safety (%)
The percentage buffer between budgeted sales and break-even sales.
Contribution
Contribution
The revenue remaining after deducting variable costs.
Target Profit (units)
Target Profit (units)
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Profit
Profit
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Contribution per Unit
Contribution per Unit
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Break Even Point (units)
Break Even Point (units)
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Prime Cost
Prime Cost
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Overhead Allocation Rate
Overhead Allocation Rate
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Break Even Point (in currency)
Break Even Point (in currency)
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Study Notes
- Margin of Safety (units) is calculated as Actual Sales less Break Even Sales.
- Margin of Safety (%) is (Budgeted Sales less Break Even Sales) divided by Budgeted Sales.
- Contribution is Sales less Variable Costs.
- Target Profit (units) is (Fixed Costs plus Target Profit) divided by Contribution per Unit.
- Profit is the Contribution less Fixed Costs.
- Contribution per Unit is Selling Price less Variable Costs.
- Break Even Point (units) is Fixed Costs divided by Contribution per Unit.
- Prime Cost consists of Raw Materials plus Direct Labor.
- Overhead Allocation Rate is Total Overhead divided by (Total Labor Hours plus Total Machine Hours).
- Break Even Point (in currency) is Break Even Point in Units multiplied by Selling Price.
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