All CPA Business Environment and Concepts (BEC) Resources
Example Questions
Example Question #21 :Operations Management: Budgeting
A company has total sales of $80,000, total variable costs of $20,000, and total fixed costs of $30,000. What is the breakeven level in sales dollars?
$50,000
$80,000
$40,000
$30,000
$40,000
The contribution margin is sales minus variable costs (80,000-20,000) = 60,000. Then, 60,000/80,000=75%. Then, breakeven is total fixed costs of $30,000/75%=$40,000.
Example Question #22 :Operations Management: Budgeting
A product has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is the product's fixed cost?
$80,000
$24,000
$96,000
$16,000
$24,000
($200,000 - $80,000) * 20%
Example Question #23 :Operations Management: Budgeting
What is the formula for breakeven point in units?
Total FC/CM per Unit
Total VC/CM per Unit
CM per Unit/Total FC
Total Costs/CM per Unit
Total FC/CM per Unit
This is the formula for breakeven point in units.
Example Question #24 :Operations Management: Budgeting
How does the margin of safety relate to breakeven in units or sales? It is:
A measure of profitability
Unrelated
The excess of breakeven sales over sales
The excess of sales over breakeven sales
The excess of sales over breakeven sales
The margin of safety is generally expressed as either dollars or a percentage and is the excess of sales over breakeven sales.