Accounting Chapter 19 Homework Unit Contribution Unit Selling Price Unit

subject Type Homework Help
subject Pages 10
subject Words 2250
subject Authors Carl S. Warren, James M. Reeve, Jonathan Duchac

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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–3B (FIN MAN); Prob. 4–3B (MAN)
Break-Even
Sales (units)
3.
4. Sales (32,000 × $150)…………………………… $4,800,000
$800,000 + $300,000
Total Fixed Costs + Target Profit
2. Sales (units) = Unit Contribution Margin
Total Fixed Costs
Unit Selling Price – Unit Variable Cost
1. = Total Fixed Costs
Unit Contribution Margin =
$6,000,000
$7,000,000
Operating Profit Area
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN)
1.
$1,200,000
$1,400,000
Operating
Profit Area
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN) (Continued)
1. Break-Even Units:
Break-Even Dollars:
Total Fixed Costs
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
Break-Even Sales (units) = Total Fixed Costs =
=
Contribution Margin Ratio = Unit Contribution Margin
Unit Selling Price
$200 Unit Selling Price
=
=Unit Selling Price – Unit Variable Cost
Unit Selling Price
37.5%
$200 Unit Selling Price – $125 Unit Variable Cost
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN) (Continued)
2.
a. b.
4,500 units 7,500 units
Sales…………………………………………………………
$900,000 $1,500,000
V
ariable costs………………………………………………
$562,500 $ 937,500
Fixed costs…………………………………………………
225,000 225,000
Total costs…………………………………………………… $787,500 $1,162,500
$400,000
$600,000
$1,600,000
Sales and Costs
Break-Even
Point
$1,500,000
$225,000
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN) (Continued)
3.
$600,000
$800,000
$1,400,000
$1,600,000
Sales and Costs
Total Sales
Total Cos ts
Operating
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN) (Continued)
3. Break-Even Units:
Break-Even Dollars:
Break-Even Sales (units) = Total Fixed Costs =Total Fixed Costs
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
$200 Unit Selling Price
Contribution Margin Ratio = Unit Contribution Margin =Unit Selling Price – Unit Variable Cost
Unit Selling Price Unit Selling Price
=
=$200 Unit Selling Price – $125 Unit Variable Cost
37.5%
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–4B (FIN MAN); Prob. 4–4B (MAN) (Concluded)
4.
a. b.
6,000 units 7,500 units
Sales…………………………………………………………… $1,200,000 $1,500,000
$0
$200,000
$400,000
$600,000
$800,000
$1,600,000
0 1,500 3,000 4,500 6,000 7,500
Sales and Costs
Units of Sales
Total Sales
Total Costs
Break-Even
Point
Operating
Loss Area
$337,500
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–5B (FIN MAN); Prob. 4–5B (MAN)
(Overall product is labeled E.)
1. Unit Selling Price of E [($12 × 30%) + ($15 × 70%)]……………………………
$14.10
Unit Variable Cost of E [($3 × 30%) + ($4 × 70%)]………………………………
3.70
2. 4,500 units of E × 30% = 1,350 units of 12-inch pizza
4,500 units of E × 70% = 3,150 units of 16-inch pizza
3. Unit selling price of E [($12 × 50%) + ($15 × 50%)]……………………………
$13.50
Unit variable cost of E [($3 × 50%) + ($4 × 50%)]………………………………
3.50
$10.00
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6B (FIN MAN); Prob. 4–6B (MAN)
1.
Sales (12,000 × $240) $2,880,000
Cost of goods sold:
Direct materials (12,000 × $50) $600,000
Expenses:
Selling expenses:
Sales salaries and commissions
[$340,000 + (12,000 × $4)] $388,000
Advertising 116,000
Travel 4,000
Miscellaneous selling expense
[$2,300 + (12,000 × $1)] 14,300
BELMAIN CO.
Estimated Income Statement
For the Year Ended December 31, 2016
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6B (FIN MAN); Prob. 4–6B (MAN) (Continued)
$1,152,000
$240 – $96
==
8,000 units
2. Contribution Margin Ratio = Sales – Variable Costs
Sales
3. Break-Even Sales (units) = Fixed Costs
Unit Contribution Margin
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
Prob. 19–6B (FIN MAN); Prob. 4–6B (MAN) (Concluded)
4.
5. Margin of safety:
In dollars:
Expected sales (12,000 units × $240)………………………
$2,880,000
Contribution Margin
Income from Operations
6.
Operating Leverage =
$0
$500,000
$1,000,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
Units
Operating
Profit Area
Break-Even Point
Operating Loss
Area
$1,152,000
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
CP 19–1 (FIN MAN); CP 4–1 (MAN)
In an absolute sense, Edward’s actions are devious. He is clearly attempting
to use the first four-year scenario, which is favorable, as a way to market the
partnerships. They are really longer-term investments. After the first four
years, the risk increases dramatically. The break-even occupancy becomes
much more difficult to achieve at 95% than it does at 65%. Focusing on the 65%
and remaining silent about the increase to 95% is deceptive. One might argue
CASES & PROJECTS
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
CP 19–2 (FIN MAN); CP 4–2 (MAN)
The airline industry has a high operating leverage. This means that fixed costs
are a large part of the cost structure. The break-even volume is apparently around
65% of capacity. When the volume falls below 65%, the industry loses money. As
the percentage increases above 65%, the industry becomes very profitable. There
change in passenger volume. However, this is unlikely. The revenue from price
increases would need to increase faster than the lost revenue from lower traffic
volume for a price increase to lower break-even. To raise ticket prices, the airline
would have to minimize the impact on lost volume. This might be possible for fare
increases targeted to business travelers who need to fly, regardless of ticket price.
scale. For example, an airline could consolidate three flights departing in the
morning from Tulsa to Dallas into just two flights departing in the morning. This
would reduce the airline’s costs but would increase the airline passengers’
inconvenience. This strategy works only if there is little loss in revenue by going
to two flights, meaning that the people bumped from the third flight go to the other
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
CP 19–3 (FIN MAN); CP 4–3 (MAN)
Do-Nothing Strategy:
Revenue – Variable Costs – Fixed Costs = Profit
($80 × 1,000,000) – ($35 × 1,000,000) – $35,000,000 = Profit
$80,000,000 – $35,000,000 – $35,000,000 = $10,000,000
Thomas’s Strategy:
James’s strategy, which is to maintain the price but increase advertising,
appears superior.
CP 19–4 (FIN MAN); CP 4–4 (MAN)
The direct labor costs are not variable to the increase in unit volume. The unit
volume is the wrong activity base for direct labor costs. The “number of
impressions” is a more accurate reflection of the direct labor cost. An impression
is a separate printing color application on the banners. Thus, the analysis should
be done as follows:
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CHAPTER 19 Cost Behavior and Cost-Volume-Profit Analysis
CP 19–5 (FIN MAN); CP 4–5 (MAN)
The Shipping Department manager should respond by pointing out that the
activities performed by his department are not related to sales volume but to
CP 19–6 (FIN MAN); CP 4–6 (MAN)
There are many possible applications of break-even analysis in a school
environment. Below are just a few possible ideas.
Revenue Fixed Costs Variable Costs
1 Break-even number Student tuition Faculty salary, space Supplies, copying
of students in a class for a class costs
Break-Even Analysis

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