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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–2A (FIN MAN); Prob. 4–2A (MAN)
1. Variable Variable
Total Cost Cost Percentage Cost
Cost of goods sold………………
…
$6,000,000 × 80% = $4,800,000
2. Total Number
Amount of Units Per Unit
Net sales……………………………
…
$17,400,000
÷
150,000 = $116.00
6. Sales ($17,400,000 + $3,625,000)………………………
…
7. Present operating income………………………………
…
…
=
Fixed Costs + Target Profit
Unit Contribution Margin
3. Fixed Costs
Unit Contribution Margin
Break-Even
Sales (units) =
5.
$21,025,000
4. Break-Even
Sales (units) =Fixed Costs
Unit Contribution Margin
Sales (units)
$4,400,000
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–2A (FIN MAN); Prob. 4–2A (MAN) (Concluded)
8. In favor of the proposal is the possibility of increasing income from operations
from $4,400,000 to $4,962,500. However, there are many points against the
proposal, including:
a. The break-even point increases by 20,000 units (from 62,000 to 82,000).
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–3A (FIN MAN); Prob. 4–3A (MAN)
Break-Even
Sales (units)
$480,000
$40*
3.
4. Sales (16,000 × $100)…………………… $1,600,000
Total fixed costs………………………… $480,000
Total variable costs (16,000 × $60)…
…
960,000 1,440,000
Income from operations………………
…
$ 160,000
Total Fixed Costs
Unit Selling Price – Unit Variable Cost
= 12,000 units
1. = Total Fixed Costs
Unit Contribution Margin
=
=
$1,500,000
$2,000,000
Sales
Total Costs
Operating Profit Area
Break-Even Point
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN)
1.
$600,000
$700,000
Operating
Profit Area
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN) (Continued)
1. Break-Even Units:
Break-Even Sales (units) = Total Fixed Costs =Total Fixed Costs
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
$250 Unit Selling Price – $175 Unit Variable Cost
=$75,000 = 1,000 units
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN) (Continued)
2.
Units sold: $500,000 ÷ $250 per unit = 2,000 units
a. b.
2,000 units 2,500 units
Sales………………………………………………………………
…
$500,000 $625,000
$0
$100,000
$600,000
0 500 1,000 1,500 2,000 2,500
Units of Sales
Operating
Profit Area
Break-Even
Point
Operating Loss
Area
$625,000
$75,000
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN) (Continued)
3.
$600,000
$700,000
Operating
Profit Area
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN) (Continued)
3. Break-Even Units:
Break-Even Sales (units) = Total Fixed Costs =Total Fixed Costs
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4A (FIN MAN); Prob. 4–4A (MAN) (Concluded)
4.
a. b.
2,000 units 2,500 units
Sales………………………………………………………………
…
$500,000 $625,000
$0
$100,000
$200,000
$700,000
0 500 1,000 1,500 2,000 2,500
Sales and Costs
Units of Sales
Operating
Profit Area
Break-Even
Point
Operating
Loss Area
$108,750
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–5A (FIN MAN); Prob. 4–5A (MAN)
(Overall product is labeled E.)
2. 4,030 units of E × 40% = 1,612 units of laptops
4,030 units of E × 60% = 2,418 units of tablets
3. Unit selling price of E [($1,600 × 50%) + ($850 × 50%)]…………………………
…
$1,225
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6A (FIN MAN); Prob. 4–6A (MAN)
1.
Sales (21,875 × $160) $3,500,000
Cost of goods sold:
Direct materials (21,875 × $46) $1,006,250
Direct labor (21,875 × $40) 875,000
Factory overhead [$200,000 + (21,875 × $20)] 637,500
Cost of goods sold 2,518,750
Gross profit $ 981,250
Expenses:
WOLSEY INDUSTRIES INC.
Estimated Income Statement
For the Year Ended December 31, 2016
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6A (FIN MAN); Prob. 4–6A (MAN) (Continued)
$525,000
$160 – $120
13,125 units
$3,500,000
=$3,500,000 – (21,875 × $120)
3. Break-Even Sales (units)
==
=Fixed Costs
Unit Contribution Margin
2. Contribution Margin Ratio = Sales – Variable Costs
Sales
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6A (FIN MAN); Prob. 4–6A (MAN) (Concluded)
4.
5. Margin of safety:
In dollars:
Expected sales (21,875 × $160)………………………………
…
$3,500,000
Break-even point (13,125 × $160)……………………………
…
2,100,000
Margin of safety…………………………………………………
…
$1,400,000
6. Operating Leverage =
Income from Operations
Contribution Margin
$3,500,000
$4,000,000
$4,500,000
Units
Operating Profit
Area
Break-Even Point
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–1B (FIN MAN); Prob. 4–1B (MAN)
Fixed Variable Mixed
Cost Cost Cost Cost
a. X
b. X
c. X
d. X
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–2B (FIN MAN); Prob. 4–2B (MAN)
1. Total Variable Cost Variable
Cost Percentage Cost
Cost of goods sold…………………………
…
$1,400,000 × 75% = $1,050,000
2. Number
Total Amount of Units Per Unit
$20 per unit
6. Sales ($2,880,000 + $900,000)………………………………
…
7. Present operating income……………………………………
…
$3,780,000
Fixed Costs + Target Profit
4. Break-Even
Sales (units) =
$20 per unit
Fixed Costs
Unit Contribution Margin
5. Unit Contribution Margin
Break-Even
Sales (units)
$692,500
Sales (units)
=
3.
=Fixed Costs
Unit Contribution Margin
CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–2B (FIN MAN); Prob. 4–2B (MAN) (Concluded)
8. In favor of the proposal is the possibility of increasing income from operations
from $692,500 to $880,000. However, there are many points against the
proposal, including:
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