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Subject Topic: CVP - break even (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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700321
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Joined: 26 Aug 2009
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Posted: 15 Nov 2009 at 04:43 | IP Logged  

The Alma Company had the following income statement for the month of July 2005:

  Alma Company
  Income Statement
  For the Month of July 2005
 
Sales ($70 x 10,000)
$700,000
Cost of goods sold:
Direct materials ($15 x 10,000)
$150,000
Direct labor ($10 x 10,000)
100,000
Variable factory overhead ($7 x 10,000)
70,000
Fixed factory overhead
220,000
540,000
 
------------
------------
Gross profit
$160,000
Selling and administrative expenses:    
Variable ($1 x 10,000)
$10,000
Fixed
140,000
150,000
 
------------
------------
Operating income
$ 10,000
 
========

What is the sales volume required to earn a profit of $135,000?

a. 10,909 units
b. 8,334 units
c. 15,000 units
d. 10,758 units

The answer is C $15,000, isnt that incorrect b/c shouldnt it say profit of $195,000 not $135,000?? isnt that a typo?

thanks

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venugopal
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Joined: 08 Jul 2009
Location: United States
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Posts: 64
Posted: 15 Nov 2009 at 09:09 | IP Logged  


 Yes it is a mistake and none of the choices are correct.  I think i remember the answer was some thing like 13.789 Units.
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