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  • 1.  Help explain Questions of Part 2

    Posted 08-10-2020 11:38 AM

    Hi,

    It would be great if you can help you explain the anwer of questions below? Thanks in advance. 

    P/s: besides, can add me (84913628099) in whatsapp for part 2 study group? 

    Question 29 (Answer C):

    Specialty Cakes Inc. produces two types of cakes, a 2 lbs. round cake and a 3 lbs. heart- shaped cake. Total fixed costs for the firm are S94,000. Variable costs and sales data for the two types of cakes are presented below. 

    Heart-shape Cake (3 lbs)

    - Selling price per unit : $20

    - Variable cost per unit: $15

    - Current sales (units) : 15,000


    Round Cake (2 lbs)

    - Selling price per unit : $12 

    - Variable cost per unit: $8

    - Current sales (units) : 10,000

    If the product sales mix were to change to three heart-shaped cakes for each round cake, the breakeven volume for each of these products would be

    A. 8,174 round cakes, 12,261 heart-shaped cakes.

    B. 12,261 round cakes, 8,174 heart-shaped cakes.

    C. 4.947 round cakes, 14,842 heart-shaped cakes.

    D. 15.326 round cakes, 8.109 heart-shaped cakes.


    Question 31( Answer B)

    Bargain Press is considering publishing a new textbook. The publisher has developed the following cost data related to a production run of 6,000, the minimum possible production run. Bargain Press will sell the textbook for S45 per copy. How many textbooks must Bargain Press sell in order to generate operating carnings (earnings before interest and taxes) of 20% on sales? (Round your answer up to the nearest whole textbook.)

    Estimated cost:

    - Development (reviews, class testing, editing): $35,000

    - Typesetting: 18,500

    - Depreciation on Equipment:9,320

    - General and Administrative: 7,500

    - Miscellaneous Fixed Costs 4,400

    - Printing and Binding: 30,000

    - Sales staff commissions (2% of selling price): 5,400

    - Bookstore commissions (25% of selling price): 67,500

    - Author's Royalties (10% of selling price): 27,000 

    Total costs at production of 6,000 copies: $204,620

    A.2.076 copies.

    B.5,207 copies.

    C.5.412 copics.

    D.6,199 copies



  • 2.  RE: Help explain Questions of Part 2

    Posted 08-11-2020 05:27 AM
    Hi VAN,

    Thanks for throwing these sorts of questions to the forum, makes our learning continuous and entertaining.

    Here is the answer for the Cake Problem. Needless to say, its smooth as a good cake when I arrived at the solution

    Rnd Cake Heart Shaped Cakes
    Sales Unit 10000 15000
    Selling Price 12 20
    Variable Cost 8 15
    CM 4 5
    Product Sales Mix (Ratio)   2 3 Current Sales Mix
      Units are Divided by common denominator 5000 5000
    Sales Mix Change is  1 3 Proposed Sales Mix
    Sales Mix  X Contribution Margin 4 15
    Use the Cost-Vol-Profit Formula
    Sales (Vol)-VC(Vol)-TFC= Profit
    Requirement is Breakeven, so  Profit =0
    Applying the above equation
    4 (RND CAKE VOLUME) +15(Heart Shaped Cake Volume)+94000=0
    (Volume)(4+15) = 94000
    Volume = 94000/19 = 4947.36
    Now Expanding this Breakeven Number to the Sales mix of each product BEP in Units
    Rnd Cake 4947.36 X 1 4947
    Heart Sh Cake 4947.36 X 3 14842


    Hope this is fine with you.

    Kind regards
    Srirama





  • 3.  RE: Help explain Questions of Part 2

    Posted 08-17-2020 05:00 AM
    Hi, 

    how did you reach the sales mix ratio in yellow

    can you elaborate

    i went for 60% 40% (15000/25000) and ( 10,000/25000) which led me to answer B and that is not correct

    Many thanks

    ------------------------------
    Tayba Al-Mehdar
    Analyst
    Khobar
    Saudi Arabia
    ------------------------------



  • 4.  RE: Help explain Questions of Part 2

    Posted 08-17-2020 02:23 PM
    Hi,

    Old sales mix  - 60% & 40 %

    If the product sales mix were to change to three heart-shaped cakes for each round cake   

    New sales mix -  3 :1
    heart shaped cake : 3/4 *100 = 75%
    round shape cake   :   1/4*100 = 25%

    Regards
    Sanjana





  • 5.  RE: Help explain Questions of Part 2

    Posted 08-11-2020 07:44 AM
    Hi ,

    Answer for question 29 :

    Fixed cost                     -    35000 + 18500 +9320+ 7500 + 4400 = 74720

    Variable Cost                 -   204620 - 74720 = 129900

    Variable cost per unit     -   129900/6000 = 21.65

    earnings before interest and taxes 20% on sales = 0.2*45*q

    0.2*45*q = (45 - 21.65) q -74720

    9q =23.35q - 74720

    q = 5206.96 




    ------------------------------
    Sanjana
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