QB1501 – Introduction to Accounting
Management Accounting – Tutorial Question Week 8
Q1. The amount by which an item contributes towards covering fixed cost and providing
for profit is known as:
A. Operating profit
B. Gross profit
C. Net profit
Q2. Consider the following information:
Sales revenue: $12 per unit
Variable manufacturing expenses: $3 per unit
Variable marketing and admin. expenses: $2 per unit
Fixed manufacturing expenses: $1,500
Fixed marketing and admin. expenses: $600
Based on the above information, the contribution margin is:
Based on the above information, the breakeven point is:
A. 175 units
B. 300 units
C. 700 units
D. 233 units
Q3 Which of the following is correct about breakeven point of a company?
A. Revenue > variable costs + fixed costs
B. Revenue = variable costs + fixed costs
C. Revenue < variable costs + fixed costs
D. None of the above
Q4 Cost-Volume-Profit (or Breakeven) Analysis
Gibson Ltd manufactures wooden guitar cases and has the following forecast costs:
Cost per case £
Other materials 20
Fixed costs per month
Tools rental 2,000
Workshop rent 3,000
Usually monthly sales are 300 units.
(a) What is contribution? Definition and calculation.
(b) Calculate the break-even point in units if the selling price is £150 per case?
(c) Calculate the Contribution-to-sales ratio and use this ratio to calculate the
break-even point in sales revenue
(d) What is “Margin-of safety”?
(e) If the selling price is increased to £160 per case, how many need to be sold to
make a £10,000 profit per month?
Q5 – Further breakeven analysis:
Fixed Expenses Variable Expenses
Rent £24,000 Cost of Sales 58% of sales
Salaries £40,000 Material Supplies 7% of sales
Depreciation £13,000 Sales Commission 5% of sales
(a) What is the contribution-to-sales ratio?
(b) What is the break-even point in pounds?
(c) If a profit of £35,000 is required what is the new sales revenue to achieve this?