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1 ABC company produces and sells shirts
1
ABC company produces and sells shirts. Each shirt sells for $40. The company pays $60 to rent vending space for one day. The variable costs are $15 per shirt. How many shirts should the company sell each day in order to break even? (Round your answer up to the nearest whole shirt.) Select one: a. 3 shirts b. 4 shirts c. 2 shirts d. 20 shirts
2
When preparing flexible budget, in which of the following scenarios can ABC Corporation NOT have favorable flexible budget variance for direct materials? When direct material price variance is ________, and when direct material quantity variance is ________, Select one: a. favorable; favorable b. favorable; unfavorable c. unfavorable; unfavorable d. unfavorable; favorable
Expert Solution
1
Option (c) is correct
For break even level of shirts, we need to calculate the contribution margin per shirt as per below:
Contribution margin per shirt = Selling price - Variable cost
Contribution margin per shirt = $40 - $15 = $25
Now,
Break even level of shirts can be calculated by the following formula:
Break even shirts = Fixed cost / Contribution margin per shirt
Given: Fixed cost = $60, Contribution margin per shirt = $25
Putting the values in the above formula, we get,
Break even shirts = $60 / $25 = 2.4 or 2 shirts
2
answer ) option c
unfavourable ;unfavourable
Direct materials price variance = ( Actual price - standard price)* actual qty
so if actual price is more variance will be unfavourable
Direct materials quantity variance = (AQ used - SQ allowed)*standard price
total variance = direct materials price variance+ DM Qty variance
when both the variance are unfavourable there will be infavourable variance , if any one of the variance is favourable then the total variance could be favourable and unfavourabl as well
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