A firm is considering discontinuing a certain product line if it does not have a

margin of safety higher than 15%. The breakeven sales are $76,800, and the
margin of safety is $13,200. Based on this information, the controller has
recommended that the firm keep this product line. Did the controller make the
appropriate decision?

A. No, because the margin of safety ratio of 17.2% is not better than 15%.
B. Yes, because the margin of safety ratio of 17.2% is better than 15%.
C. No, because the margin of safety ratio of 14.7% is not better than 15%.
D. Yes, because the margin of safety ratio of 14.7% is better than 15%.

A company has sales of one of its products of $400,000 per year and a
contribution margin ratio of 20%. Its margin of safety is $40,000.
What is the company’s breakeven point?
What are the company’s fixed costs?
A company is contemplating marketing a new product. Fixed costs will be $800,000 for
production of 75,000 units or less and $1,200,000 if production exceeds 75,000 units.
The variable cost ratio is 60% for the first 75,000 units. Variable costs will decrease to
50% of sales for units in excess of 75,000. If the product is expected to sell for $25 per
unit, how many units must the company sell to break even?
Kyle runs a store that sells small and large space heaters. The large heaters each sell for
$250 with variable costs of $120, while the small space heaters each sell for $80 with
variable costs of $30. Currently, small heaters constitutes 75% of the total sales volume. The
fixed costs of the store are $126,000. What is the breakeven point in units?
 A company sells two products, X and Y. The sales mix consists of a composite unit of 2 units of X for
every 5 units of Y (2:5). Fixed costs are $49,500. The unit contribution margins for X and Y are $2.50
and $1.20, respectively. Considering the company as a whole, the number of composite units to break
even is
A company sells two products, X and Y. The sales mix consists of a composite unit of 2
units of X for every 5 units of Y (2:5). Fixed costs are $49,500. The unit contribution margins
for X and Y are $2.50 and $1.20, respectively. If the company had a profit of $22,000, the unit
sales Product X Product Y must have been
Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a
variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost
percentage equal to 70% of its $30 selling price. For the past several years, unit sales of Product X
were 40% of total unit sales. That ratio is not expected to change.
Requirements
1. How many units of Product X and Y will Catfur sell at the breakeven point?
2. What is Catfur’s breakeven point in dollars?
3. Assume that Catfur Company achieved its planned breakeven level of sales in dollars, but the mix
of products sold was one-to-one. All actual costs and unit selling prices equaled budgeted amounts.
What is the impact on Breakeven revenue?
 Product A accounts for 75% of a company’s total sales revenue and has a variable cost
equal to 60% of its selling price. Product B accounts for 25% of total sales revenue and
has a variable cost equal to 85% of its selling price. What is the breakeven point given
fixed costs of $150,000?

A corporation sells two products with the following characteristics:

Contribution margin ratio Product 1 40% Product 2 50%

Percentage of sales dollars Product 1 40% Product 2 60%
Total Fixed costs $240,000 and $700,000The breakeven point in dollars is
FJJ Industries is planning to redesign the package for its marble chess set and to change the
packaging material to recyclable material. It has a choice of two machines for making the new package:
Machine A, which costs $25,000, or Machine B, which costs $10,000. The machines will produce the
same quality package. Machine A is highly automated and does not require an operator. Machine B is
labor intensive and requires an operator. Because of the difference in labor costs, FJJ has estimated
that the variable cost for Machine A’s production will be $0.50 per unit, whereas the variable cost for
Machine B’s production will be $2.50 per unit. At which volume of production will FJJ be indifferent to
the costs of the two machines?
 Company can operate for a maximum of 40,000 hours. What is the optimal product mix to maximize the profit?

The Company is not able to hire more skilled technicians, and therefore, the direct labour hours available for
production is limited to 947,000 hours. If Management's strategy is to maximise profitability, how many units of
each product should be produced next year?
 A Cosmetics company has 3 line of perfume performed from Orchid nectar. Orchid nectar costs $5
per gram. Which of the following three should be given the priority while producing with limited
supply of Orchid nectar?

Barlow Company has got 3 products. Same raw material is used in all products and the company has got
only 5,000 pounds. Company purchases the material for $8 per pound. Which order would you
recommend the company to produce the products to maximize the profit with the limited input?
Moorehead manufacturing company produces 2 products. The Fixed manufacturing overhead cost is
applied at a rate of $1 per machine hour. The sales manager has had a $160,000 increase in the
budget allotment for advertising and wants to apply the money to the most profitable product.
Suppose the company has only 100,000 machine hours, that can be made available to produce
additional units of XY7 and BD4. If the potential increase in sales units for either product resulting
from advertising is far in excess of this production capacity, only one of them can be produced.
Which product should be advertised and what is the estimated increase in Contribution Margin
earned?
If the material availability is limited to 1,000 kg,what is the optimal product mix to maximize the profit?