MANAGEMENT ACCOUNTING
CONCEPTS AND TECHNIQUES
By Dennis Caplan, University
at Albany (State University of New York)
CHAPTER
5:� Exercises and Problems:
51: Sara, Sarah, Shara and Associates want to earn a total contribution margin of $10,000 on sales of 1,000 units. Their sales price is $15 per unit, and their fixed costs are $5,000. What variable cost per unit is necessary to achieve their goal?
52: George and Gracie both make the same product, and sell it for the same
sales price. Gracie has a higher variable cost per unit than George. George has
higher fixed costs than Gracie. Who has the higher breakeven point, in terms of
number of units sold?
(A) ����� Gracie has a higher breakeven point than George.
(B) ����� George has a higher breakeven point than Gracie.
(C) ����� Gracie and George have the same breakeven point.
(D) ����� Impossible to ascertain, from the information given.
53: The Virginia Company has fixed costs of $100,000 per
month, and variable costs of $30 per unit of output. The sales price is $50 per
unit of output. How many units would the company have to sell per month, to
generate profits of $30,000 per month?
54: The Charleston Company has fixed costs of $20,000 per month,
and variable costs of $15 per unit of output. The company would like to earn
profits of $4,000 per month. At a sales volume of 12,000 units per month, what
sales price per unit would the company have to charge in order to achieve its
targeted monthly profit?
55: The Delaware Company has fixed costs of $100,000 per
year and variable costs of $10 per unit of output. The Pennsylvania Company has
fixed costs of $120,000 per year and variable costs of $9 per unit of output.
The sales price per unit is the same for both companies. Identify a sales price
at which both companies will have the same breakeven point in terms of number
of units sold.
56: The Biloxi Company has the following cost structure:
fixed costs of $70,000 per month and variable costs of $50 per unit. The
Birmingham Company has the following cost structure: fixed costs of $60,000 per
month and variable costs of $60 per unit. Both companies make the same product,
which sells for $100 per unit. There is a sales level at which these two companies
earn the same profits. What is that sales level? Which company is more
profitable as sales volume exceeds this sales level?
57: Company X and Company Y sell
the same product for the same price. Company X has fixed costs of $100 and
variable costs of $10 per unit. Company Y has fixed costs of $200 and variable
costs of $8. What is the unit sales price at which these companies will have
the same breakeven point in terms of unit sales?
58: Eliza sells flowers in
59: The following information is available for the publisher of �Frank the Cow Dog� Children�s Books:
����������� Variable cost:� $10.00 per book
����������� Sales price:����� $15.00 per book
����������� Fixed costs:���� $35,000 per year
These costs apply over a relevant range of the production of one book to the production of 40,000 books.
Required:
A) What is the contribution margin per unit?
B) What would operating income be at a sales level of 15,000 books?
C) What is the breakeven point in units?
D) Ignore the sales price of $15 per book. What would the sales price have to be for the publisher to earn operating income of $165,000 on sales of 25,000 books?
510: The Emerald Street Ice Cream Shop sells ice cream cones.
The store�s cost structure is as follows: fixed costs per month are $2,000.
Variable costs are $1.50 for a single scoop cone and $1.75 for a double scoop
cone.
Required:
A)
������ If Emerald Street only sells double scoop cones, and sells them for
$4.25 per cone, what is the breakeven point in units?
B) ������ If
Emerald Street only sells single scoop cones, and charges $3.50 per cone, how
many ice cream cones would
C) ������ Assume
that
D)
������ Ignore Part (C) and refer to the original information. If
511: Teddy Bear Fudge Company makes two types of fudge:
plain fudge and fudge with nuts. Following is information about the company�s
cost structure when 1,000 pounds of fudge are produced. There is no direct
labor.
�����������

Overhead 
Plain Fudge 
Fudge with Nuts 
Per unit information: Sales price per pound Direct materials per pound Sales commission per pound Variable overhead Fixed costs: Fixed manufacturing overhead Fixed nonmanufacturing overhead 
$500 $2,000 $300 
$8.00 $2.00 $0.50 
$8.00 $2.25 $0.50 
Required: Assuming that variable overhead costs are linear in the
quantity of production (i.e., pounds of fudge), and assuming that 50% of sales
are plain fudge, and 50% of sales are fudge with nuts, calculate the breakeven
point in pounds of fudge.�
�����������
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Management
Accounting Concepts and Techniques; copyright 2006; most recent update:
November 2010
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