Chapter 03 – Fundamentals of Cost-Volume-Profit Analysis
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Sales …………………………..
$500,000
100%
$500,000
100%
Variable cost ………………..…
Contribution margin …………
$150,000
$400,000
Fixed costs …………………..…
3-31. (30 min.) Analysis of Cost Structure: Foxx Company vs. Beyonce, Inc.
a.
Foxx Company
Beyonce, Inc.
Amount
Percentage
Amount
Percentage
Sales …………………………..
Variable cost ………………..…
Contribution margin …………
$150,000
$480,000
Fixed costs …………………..…
3-32. (15 min.) CVP and Margin of Safety: Rainbow Tours.
a.
Profit
=
(P – V)X – F
=
=
=
=
Chapter 03 – Fundamentals of Cost-Volume-Profit Analysis
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Chapter 03 – Fundamentals of Cost-Volume-Profit Analysis
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Chapter 03 – Fundamentals of Cost-Volume-Profit Analysis
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3-35. (20 min.) CVP With Income Taxes: Crest Industries.
a.
Profit
=
(P – V)X – F
=
($160 – $64)X – $720,000
3-36. (20 min.) Multiproduct CVP Analysis: Rio Coffee Shoppe.
First, compute the weighted-average contribution margin per unit:
Profit
=
(P – V)X – F
=
$0.96 X – $6,720
=
7,000 cups
=
4,200 (= 60% x 7,000) cups of coffee and
2,800 (= 40% x 7,000) lattes
3-37. (20 min.) Multiproduct CVP Analysis: Mission Foods.
Chapter 03 – Fundamentals of Cost-Volume-Profit Analysis
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= $1.95 = 40% x ($3.00 – $1.50) + 60% x ($4.50 – $2.25)
(P – V)X – F
$1.95 X – $117,000
24,000 (= 40% x 60,000) chicken tacos and
36,000 (= 60% x 60,000) fish tacos
c. First, compute the weighted-average contribution margin per unit:
(P – V)X – F
$1.65 X – $117,000
70,910 tacos (rounding up)
56,728 (= 80% x 70,910) chicken tacos and
14,182 (= 20% x 70,910) fish tacos
Solutions to Problems
3-38. (35 min.) CVP Analysis and Price Changes: Argentina Partners.
+
+
115% 50% $15
+
110% 25% $15
+
120% 25% $15
= $17.25
Price:
New price
=
110% $30 = $33.00
Fixed costs:
New fixed costs
=
105% $700,000 = $735,000
Sales:
=
$200,000
=
(P – V)X – F
=
($33.00 – $17.25)X – $735,000
=
$935,000 ÷ ($33.00 – $17.25)
=
59,365 units (rounded)
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or sales of 59,365 $33
=
$1,959,045
b.
Profit target = $200,000 106%
=
$212,000
=
(P – V)X – F
=
($33.00 – $17.25)X – $735,000
=
$947,000 ÷ ($33.00 – $17.25)
=
PX – VX – F
=
3-39. (35 min.) CVP Analysis and Price Changes: Scholes Systems.
+
+
115% 50% $30
+
110% 25% $30
+
120% 25% $30
= $34.50
Price:
New price
=
110% $60 = $66.00
Fixed costs:
New fixed costs
=
105% $1,400,000 = $1,470,000
Sales:
Profit target
=
$1,000,000
=
(P – V)X – F
=
($66.00 – $34.50)X – $1,470,000
=
$2,470,000 ÷ ($66.00 – $34.50)
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X
=
$2,530,000 ÷ ($66.00 – $34.50)
=
80,318
units (rounded up)
=
PX – VX – F
$1,060,000
=
P(80,000) – ($34.50 80,000) – $1,470,000
Rearranging,
$1,060,000 + ($34.50 80,000) + $1,470,000
=
P(80,000)
$5,290,000 ÷ 80,000
3-40. (20 min.) CVP Analysis―Missing Data: Durant Manufacturers.
a. $4.10
Because the volume is given, it is not necessary to know the fixed and variable costs
=
Revenues – Costs
=
150,000 x Price – Costs
=
150,000 P – $315,000
=
150,000 P
=
$4.10
=
Revenues – Costs
0.20 Revenues
=
(P – V)X – F
0.20 Revenues
=
Revenues – 0.6 Revenues – $420,000
0.20 Revenues
=
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$0.50X
=
$50,000
X =
$50,000
$0.50
(P – V) X – F
0
=
($800 – $480) X – $160,000
X
=
$160,000 ÷ $320
=
500 students
b.
=
=
$240,000 ÷ $320
=
c. (1)
Profit
c. (2)
10% price decrease. Now P = $720
Profit
20% price increase. Now P = $960