ACC 203 Quiz Part II

  1. ____Willy has fixed costs of $30,000.  The price of their product is $10 and the variable costs = $4 per unit.  What is the breakeven point in units?

Ans. Breakeven point (units):-5000 units

 

  1. ____Tommie Co. has fixed costs of $250,000 and a CM ratio of .35.  How much revenue would Tommie need to generate to make a profit of $60,000?

Ans: Profit = Contribution Margin Ratio X Revenue – Fixed Costs

$60000= 0.35 x Revenue – $250000

$310000 = 0.35 Revenue

Desired Revenue = $310000/0.35= $885,714.29

  1. When creating a master budget, the first budget to be prepared is which one?

Ans. The first budget is to be prepared is the sales budget.

  1. ____Bob computed the net present value of a project and found that the NPV was $2,000 when he discounted the future cash flows using a 6% discount rate.  Was the IRR 6%, less than 6% or greater than 6%?

Answer: Less than 6% as Present Value is greater than 0

 

  1. Billie computed the NPV for a project and found that NPV=0.  Is the investment acceptable or unacceptable.

Ans. It adds no value, hence it should be Unacceptable.

 

  1. Barney invests $1,000 today.  What is the future value of this investment at the end of 5 years if the money is invested at 8%?

Ans. $1469.33

 

  1. ___Klingon is considering an investment which costs $13,337.  The investment is for 8 years and generates cash flows of $2500 per year.  The internal rate of return for this investment would be about…?

Ans. 10%

  1. ___Donna sets a price of $10 per unit on her product.  The variable cost per unit is $8.  What is the contribution margin ratio?

Ans. Contribution margin ratio= sale price- variable cost/ sale price per unit

10-8/10 = 0.2

  1. ___When goods get finished, the Finished Goods account is debited, but which account gets credited

Ans. Work in progress account gets credited.

  1. ___Johnson Company has fixed costs of $1,000,000.  The contribution margin per unit is $4.00 and the contribution margin ratio is .40.  The break-even point in units would be…?

Ans: $1,000,000/4 = 250,000 units

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