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Q1. What is the formula for calculating the margin of safety?
Solution:
Margin of safety is calculated as Actual Sales minus Break-even Sales.
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Q2. What is the total variable cost if a company produces 1,000 units with a variable cost per unit of $40?
Solution:
Total Variable Cost = Variable Cost per unit * Number of units = $40 * 1,000 = $40,000.
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Q3. Which costing method is most appropriate for a company producing custom-made products?
Solution:
Job order costing is suitable for custom-made products as it tracks costs for each individual job.
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Q4. If a company has a break-even point of 1,000 units and sells each unit for $50, what is the total revenue at the break-even point?
Solution:
Total revenue at the break-even point is calculated as Break-even Units (1,000) multiplied by Selling Price per Unit ($50), resulting in $50,000.
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Q5. What is the break-even point in sales dollars if the fixed costs are $100,000 and the contribution margin ratio is 40%?
Solution:
Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio = $100,000 / 0.40 = $250,000.
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Q6. If a company has a contribution margin of $200,000 and fixed costs of $150,000, what is the net profit?
Solution:
Net profit = Contribution Margin - Fixed Costs = 200000 - 150000 = $50,000.
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Q7. Which costing method is most appropriate for a company that produces custom-made products?
Solution:
Job order costing is suitable for companies that produce custom-made products, as it tracks costs for each individual job.
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Q8. If a company has a total revenue of $500,000 and total variable costs of $300,000, what is the total contribution margin?
Solution:
Total Contribution Margin = Total Revenue - Total Variable Costs = $500,000 - $300,000 = $200,000.
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Q9. A company has fixed costs of $30,000 and a contribution margin of $10 per unit. How many units must be sold to achieve a target profit of $10,000?
Solution:
Required sales (units) = (Fixed costs + Target profit) / Contribution margin per unit = ($30,000 + $10,000) / $10 = 4,000 units.
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Q10. What is the break-even point in units if fixed costs are $10,000 and the contribution margin per unit is $50?
Solution:
Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $50 = 200 units.
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