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31) The advantage of the Percent of Sales Method of creating pro forma statements is in its ability to A) Accommodate changing relationships between expenses and revenue B) Be created with ease and speed C) Model actual changes in the competitive environment D) Provide projections reflecting major shareholder beliefs and aims E) Reliably bring to management’s attention key financing issues 32) Abbey Lane Breweries had sales revenue of $64,000, Cost of Goods Sold of $25,600, Commission Sales Expenses of $16,000, Customer Delivery Expenses of $3,200, Other Miscellaneous Expenses of $7,200. If Sales are targeted to go up by 7% using the Percent-of-Sales Method, what will EBT for the coming year be? A) $41,088 B) $19,200 C) $12,000 D) $38,400 E) $13,344 33) Mandrake Manufacturing had sales revenue for the second quarter of $936,000. Cost of Goods Sold was $520,000. The company is expecting a manufacturing cost increase of 5%. It is increasing its average selling price from $180 this year to $195 next year and expecting a sales volume decrease of 5%. What is the company’s projected gross profit for the coming year? A) $468,000 B) $417,300 C) $444,600 D) $495,300 E) $494,000 34) Trekker Trash and Recycling is expected to have receivables of $1,234,000 in January, $989,700 in February and $1,020,000 in March. The company’s pattern of cash collections is 60% in the month following the sale, and 40% in the month after that. How much will Trekker collect from its receivables in March? A) 1,001,820 B) 1,007,880 C) 1,020,000 D) 1,087,420 E) 1,136,280 35) The TruGlass Bottle Company manufactures glass bottles for the beverage industry. Which of the following statements is correct about its breakeven point? A) The breakeven point refers to the amount of breakage and spoilage in the factory. B) The breakeven point refers to quantity of sales that generates neither a profit or a loss. C) The breakeven point refers to the last straw for the company’s bankers. D) The breakeven point refers to the profit or loss generated by an amount of sales. E) The breakeven point refers to the sales needed to match the variable cost per unit plus the fixed costs. 36) Which of the following best describes the contribution margin? A) It refers to the selling price less the fixed cost per unit. B) It refers to the selling price divided by the fixed cost per unit. C) It refers to the selling price less the variable cost per unit. D) IIt refers to the selling price divided by the variable cost per unit. E) It refers to the selling price divided by the difference between the selling price and the fixed cost per unit. 37) Argo Heating Ltd. manufactures air conditioners. For 100,000 air conditioners, direct material, direct labour, and direct overhead was $2,000,000, $6,000,000, and $ 4,000,000 respectively. The air conditioners sell for $280 each. Factory rent was $400,000 and advertising was another $500,000. Management salaries totalled $2,000,000. Which of the following is the breakeven point for Argo Heating? A) 10,357 units B) 18,125 units C) 24,167 units D) 42,857 units E) 75,000 units 38) The Block Defender video game sells for $50 and costs $10 to manufacture. Fixed costs were $5,000,000. Which of the following statements is correct? A) The contribution margin ratio is 20% and the breakeven point is 5,000,000 units. B) The contribution margin ratio is 20% and the breakeven point is 6,250,000 units. C) The contribution margin ratio is 80% and the breakeven point is 5,000,000 units. D) The contribution margin ratio is 80% and the breakeven point is 6,250,000 units. E) The contribution margin ratio is 500% and the breakeven point is 1,000,000 units. 39) YPad is priced at $500 per unit and has the following cost structure: factory variable manufacturing costs per unit $100; factory fixed costs total $1,000,000; sales commissions are 10% of selling price; delivery expenses to retail stores are 5% of selling price; management salaries total $3,000,000; head office rent $200,000 per year; interest on bank loan is $50,000 per month. What is the breakeven point in units for the YPad? A) 2,769,231 units. B) 6,461,538 C) 6,538,462 D) 7,076,923 E) 7,384,615 40) The breakeven chart for Denim Inc.’s new Wholly Bluejean line shows the net income line intersecting the zero line at 250,000 units. At this number of units, the total cost line reads $80,000,000 and the sales line reads $90,000,000. The jeans are expected to sell for $250. What conclusion can be drawn from this information? A) The breakeven chart cannot be right. B) The breakeven point is 40,000 units. C) The breakeven point is 250,000 units. D) The breakeven point is 320,000 units. E) The breakeven point is 360,000 units.

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