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12-11
E12.13.
a.
Use the model, enter the known data, and solve for the unknown.
Per Unit
*
Volume
=
Total
%
Revenue
$ ?
100%
b.
Per Unit
*
Volume
=
Total
%
Revenue
$12.00
100%
Variable Expense
7.80
65%
Contribution Margin
$ 4.20
*
?
=
$ ?
35%
E12.14.
a.
Per Unit
*
Volume
=
Total
%
Revenue
$ ?
100%
Variable Expense
8.25
66%
Contribution Margin
$ ?
*
?
=
$ ?
34%
b.
Note: The requirement is to determine the number of units of the new product
that must be sold to break even on the new product.
Per Unit
*
Volume
=
Total
%
Revenue
$12.50
100%
Chapter 12 Managerial Accounting and Cost-Volume-Profit Relationships
E12.14.
(continued)
New Product
Existing Products
Total
c.
Revenue
$13.75 * 20,000 = $275,000
$275,000
$550,000
Variable Expense
8.25
Contribution Margin
$ 5.50 * 20,000 = $ 110,000
$ 93,500 = 34%
203,500
d.
The specific data for existing products, not known in this example, would have to be
adjusted for the reduction due to volume "stolen" by the new product. This could result
E12.15.
a.
Per Unit
*
Volume
=
Total
%
Revenue
$1.25
100%
Variable Expense
0.35
28%
E12.16.
a.
Per Unit
*
Volume
=
Total
Revenue
$9.99
b.
Revenue#
$5.00
Variable Expense
3.00
Contribution Margin
$2.00
*
?
=
$2,796
12-13
E12.16.
(continued)
c.
Will customers buy other products such as drinks, salads, etc.? Will this
promotion "steal" volume from large and small pizzas? If so, normal
P12.17.
a.
Solution approach: First, calculate variable cost per unit in September and use
the same per unit cost for October. Second, fixed cost will be the same for each
month. Third, with knowledge of total costs for August, and variable and fixed
costs for October, solve for mixed costs for October.
September
October
Activity ………………………………………
5,000 units
8,000 units
b.
Variable rate
=
(High $ - Low $) / (High units - Low units)
=
($24,500 - $20,000) / (8,000 - 5,000)
=
$4,500 / 3,000 = $1.50 per unit
Total mixed cost
=
Fixed cost + Variable cost
$24,500
=
? + ($1.50 * 8,000 units)
P12.18.
February
August
a.
Production level (units) …………………………
12,000 units
18,000 units
Costs:
Variable ($21,000 / 12,000 units = $1.75 per unit)
$21,000
$ 31,500
b.
Total mixed cost
=
(Fixed cost + Variable cost)
Variable cost
=
(Variable rate * Volume)
Chapter 12 Managerial Accounting and Cost-Volume-Profit Relationships
P12.18.
(continued)
b.
At 12,000 units:
Variable cost
=
($1.25 * 12,000 units) = $15,000
Total mixed cost
=
Fixed cost + Variable cost
$18,000
=
Fixed + $15,000
Fixed
=
$3,000
=
$3,000 + $1.25 per unit
c.
At 20,000 units:
Variable (20,000 units * $1.75 per unit) …………
$ 35,000
Fixed (same total amount each month)……………
31,000
P12.19.
a.
Revenues (8,000 units * $4 per unit) …………………
$32,000
Variable expenses:
Cost of goods sold (8,000 units * $2.10 per unit) ……
$16,800
Selling expenses (8,000 unit * $0.10 per unit) ………
800
Administrative expenses (8,000 units * $0.20 per unit)
1,600
b.
Contribution margin per unit = Total CM / Volume = $12,800 / 8,000 units = $1.60
Alternative approach:
CM per unit = Selling price per unit - Variable expense per unit
P12.19.
(continued)
c.
1. Volume of 12,000 units:
Per Unit
*
Volume
=
Total
%
Revenue
$4.00
100%
Variable Expense
2.40
60%
2. Volume of 4,000 units:
Per Unit
*
Volume
=
Total
%
Revenue
$4.00
100%
Variable Expense
2.40
60%
d.
1. Use the contribution margin ratio of 40%. Revenue increase of $12,000 causes a
2. Revenue decrease of $7,000 causes a $2,800 decrease (40% * $7,000) in
P12.20.
a.
Revenues (15,000 units * $7.00 per unit) ...……………
$105,000
Variable expenses:
Cost of goods sold (15,000 units * $ 3.60 per unit)……
$54,000
Selling expenses (15,000 units * $0.80 per unit)………
12,000
Administrative expenses (15,000 units * $0.50 per unit)
7,500
Chapter 12 Managerial Accounting and Cost-Volume-Profit Relationships
P12.20.
(continued)
b.
Contribution margin per unit = Total contribution margin / Volume = $31,500 /
15,000 units = $2.10 per unit
Alternative approach:
Contribution margin per unit = Selling price per unit - Variable expense per unit
CM ratio = CM per unit / Selling price per unit = $2.10 / $7.00 = 30%
c.
1. Volume of 20,000 units:
Per Unit
*
Volume
=
Total
Revenue
$7.00
Variable Expense
4.90
2. Volume of 10,000 units:
Per Unit
*
Volume
=
Total
Revenue
$7.00
Variable Expense
4.90
d.
1. Use the contribution margin ratio of 30%. Revenue increase of $15,000
2. Revenue decrease of $10,000 causes a $3,000 decrease (30% * $10,000) in
12-17
P12.21.
a.
Sales ……………………………………………………………………
$65,000
Variable expenses (80% * $65,000) ……………………………………
(52,000)
Contribution margin (20% * $65,000) …………………………………
$13,000
Fixed expenses …………………………………………………………
(18,000)
Operating loss …………………………………………………………
$(5,000)
b.
Increase in sales (30% * $65,000) ………………………………………
$19,500
Contribution margin ratio ………………………………………………
20%
Increase in contribution margin …………………………………………
$ 3,900
c.
At break-even, contribution margin = fixed expenses = $18,000
Contribution margin = (20% contribution margin ratio * ??? sales) = $18,000
P12.22.
a.
Sales ……………………………………………………………………
$80,000
Variable expenses (70% * $80,000) ……………………………………
(56,000)
Contribution margin (30% * $80,000) …………………………………
$24,000
b.
Increase in sales (8% * $80,000) ………………………………………
$6,400
Contribution margin ratio …………………………………….…………
30%
c.
At break-even, contribution margin = fixed expenses = $18,000
Contribution margin = (30% contribution margin ratio * ??? sales) = $18,000
Chapter 12 Managerial Accounting and Cost-Volume-Profit Relationships
P12.23.
a.
Per Unit
*
Volume
=
Total
Revenue
$15
Variable Expense
9
Contribution Margin
$ 6
*
?
=
$ 27,000
Fixed Expense
(27,000)
Operating Income
$ 0
b.
Margin of safety = Total sales – Break-even sales
= $75,000 - $67,500
= $7,500
c.
Per Unit
*
Volume
=
Total
Revenue
$15
Variable Expense
9
Contribution Margin
$ 6
*
5,400
=
$32,400
Fixed Expense
(27,000)
Operating Income
$ 5,400
e.
Does the increase in volume move fixed expenses into a new relevant range?
Are variable expenses really linear?
f.
Per Unit
*
Volume
=
Total
Revenue
$16
12-19
P12.23.
(continued)
g.
1. Volume of 5,400 units per month:
Per Unit
*
Volume
=
Total
Revenue
$15.00
Variable Expense
9.80
2. Volume of 6,000 units per month:
Per Unit
*
Volume
=
Total
Revenue
$15.00
Variable Expense
9.80
Per Unit
*
Volume
=
Total
h.
Revenue
$15
Variable Expense
9
P12.24.
a.
Per Unit
*
Volume
=
Total
Revenue
$32.00
Variable Expense
20.80
Contribution Margin
$11.20
*
4,250
=
$47,600
b.
Margin of safety = Total sales – Break-even sales
= $160,000 - $136,000 ($32 * 4,250 = $136,000)
P12.24.
(continued)
Chapter 12 Managerial Accounting and Cost-Volume-Profit Relationships
12-20
c.
Per Unit
*
Volume
=
Total
Revenue
$32.00
Variable Expense
20.80
d.
Per Unit
*
Volume
=
Total
Revenue
$33.00
Variable Expense
20.80
Original
New Product
Total
e.
Revenue
$32.00
$20
Variable Expense
20.80
14
Original
New Product
Total
f.
Revenue
$32.00
$20
g.
The contribution margin ratio for each product is different, so that changes in the sales mix
result in a change in total contribution margin. Specifically, in this case, a shift occurred
such that a larger proportion of the mix consisted of the newer, lower margin product.
P12.25.
a. & b.
Current
Operation:
Luxury
Economy
Total
Revenue
$20 * 10,000 = $200,000
$12 * 20,000 = $240,000
$440,000
Variable Expense
8
7
________
