# 1) Florek Inc. produces and sells a single product. The company has provided its contribution...

## Question:

## Variable Cost.

Variable Cost is the Cost that is used in production. Variable Cost is not constant; it changes according to the increase or decrease of sale. The variable cost will increase as the sales of the company increases, and the variable cost will decrease as the sales will decrease.

## Answer and Explanation:

**(1)**

**The correct option is b(12,300)**

Sales: 301,500

Less-VC: (201,000)

Contribution: 100,500

Less-Fixed Expenses: (88,200)

NOI: 12,300

As,

{eq}\begin{align*} {\rm{S}}& = {\rm{Units\;Sold}}\left( {Sales\;per\;unit} \right)\\ & = 6700\left( {45} \right)\\ & = 301,500\\ {\rm{VC}} &= {\rm{Units\;Sold}}\left( {VC\;per\;unit} \right)\\ & = 6700\left( {30} \right)\\ &= 201,000\\ \end{align*} {/eq}

**(2)**

**The correct option is d(67,100)**

{eq}\begin{align*} {\rm{MOS}} &= {\rm{AS}} - {\rm{BEPS}}\\ 366,000& ={\rm{AS}} - 0.25\;of\;AS\\ 366,000 &= 0.75\;of\;AS\\ {\rm{AS}}& = \dfrac{{366,000}}{{0.75}}\\ &= 488,000 \end{align*} {/eq}

{eq}\begin{align*} {\rm{FC}} &={\rm{BEPS}} \times {\rm{PV\;Ratio}}\\ & = 366,000 \times \left( {100\% - 45\% } \right)\\ & = 366,000\left( {55\% } \right)\\ &= 201,300 \end{align*} {/eq}

{eq}\begin{align*} {\rm{AP}}& = {\rm{Sales}} - {\rm{VC}} - {\rm{FC}}\\ & = 488,000 - 219,000 - 201,300\\ & = 67,100 \end{align*} {/eq}

**(3)**

**The correct option is a(216,000)**

{eq}\begin{align*} {\rm{C}}& ={\rm{S}} - {\rm{VC}}\\ & = 240 - 76.80\\ & = 163.2 \end{align*} {/eq}

{eq}\begin{align*} {\rm{Break\;Even\;sales}} &= \dfrac{{{\rm{FC}}}}{{{\rm{C}}}} \times SP\\ & = \dfrac{{146,880}}{{163.2}}\left( {240} \right)\\ & = 216,000 \end{align*} {/eq}

**(4)**

**The correct option is b(26,900)**

{eq}\begin{align*} {\rm{Ratio}} &= 1 - {\rm{VC}}\\ & = 1 - 0.35\\ & = 0.65\\ {\rm{NOI\;Increase}} &= \left( {0.65} \right)\left( {86,000} \right) - 29,000\\ & = 55,900 - 29,000\\ & = 26,900 \end{align*} {/eq}

**(5)**

**The correct option is b(10875)**

Particulars | Total | Per unit |

Sales(13,000units) | 260,000 | 20 |

Less-VC | 156,000 | 12 |

Contribution | 104,000 | 8 |

{eq}\begin{align*} {\rm{BEP(units)}}& = \dfrac{{{\rm{FC}}}}{{{\rm{Contribution\;per\;unit}}}}\\ & = \dfrac{{87,000}}{8}\\ &= 10875 \end{align*} {/eq}

Here,

FC is fixed cost.

VC is variable cost.

BEP is break even point.

SP is selling price.

MOS is margin of safety.

AS is actual sales.

AP is actual profit.

#### Learn more about this topic:

from

Chapter 3 / Lesson 5Total costs are compared to total revenue and are either lower (profit), higher (loss), or equal (break-even point). Learn to calculate this and identify target profit, as well as establish a margin of safety to accommodate unanticipated risks.