CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-2A
1. Variable Cost Variable
Total Cost Percentage Cost
Cost of goods sold…………… $25,000,000 × 70% = $17,500,000
Selling expenses……………… 4,000,000 × 75% = 3,000,000
Administrative expenses……
…
3,000,000 × 50% = 1,500,000
Total variable cost…………
…
$32,000,000 $22,000,000
Variable Fixed
Total fixed cost………………
$22,000,000 $10,000,000
2. Total Number
Amount of Units Per Unit
Sales……………………………
…
$47,000,000 ÷ 500,000 = $94.00
…
…
$26,800,000
$50 per unit
…
7. Present income from operations…………………………
…
Less additional fixed costs………………………………
…
Income from operations……………………………………
…
200,000 units=
=
5.
3.
=
=
Fixed Costs + Target Profit
Unit Contribution Margin
=
536,000 units==
Sales (units)
$11,800,000 + $15,000,000
$50 per unit
1,800,000
$13,200,000
$15,000,000
Break-Even Sales (units)
$10,000,000
Fixed Costs
Unit Contribution Margin
…
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-2A (Concluded)
8. In favor of the proposal is the possibility of increasing income from operations
from $15,000,000 to $15,200,000. However, there are many points against the
proposal, including:
a. The break-even point increases by 36,000 units (from 200,000 to 236,000).
b. The sales necessary to maintain the current income from operations of
$15,000,000 would be 536,000 units, or $3,384,000 (36,000 units × $94) in
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-3A
1. Break-Even
Sales (units)
$480,000
$40*
* $100 unit selling price – $60 unit variable cost
$40
3.
4. Sales (16,000 × $100)……………………………
…
$1,600,000
Total Fixed Costs
Unit Selling Price – Unit Variable Cost
= 12,000 units
Sales (units)
=Total Fixed Costs
Unit Contribution Margin
2. = Fixed Costs + Target Profit
Unit Contribution Margin
=
=
Total Sales
Total Costs
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A
1.
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A (Continued)
1. 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
$250 Unit Selling Price – $175 Unit Variable Cost
Contribution Margin Ratio = Unit Contribution Margin =Unit Selling Price – Unit Variable Cost
Unit Selling Price Unit Selling Price
=$75,000 = 1,000 units
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A (Continued)
2.
a. b.
2,000 units 2,500 units
Sales………………………………………………………………
…
$500,000 $625,000
V
ariable costs……………………………………………………
…
$350,000 $437,500
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A (Continued)
3.
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A (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
=$75,000 + $33,750 = 1,450 units
$250 – $175
Contribution Margin Ratio = Unit Contribution Margin =Unit Selling Price – Unit Variable Cost
Unit Selling Price Unit Selling Price
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-4A (Concluded)
4.
a. b.
2,000 units 2,500 units
Sales………………………………………………………………
…
$500,000 $625,000
V
ariable costs……………………………………………………
…
$350,000 $437,500
Fixed costs………………………………………………………
…
108,750 108,750
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-5A
(Overall product is labeled E.)
1. Unit selling price of E [($1,600 × 40%) + ($850 × 60%)]…………………………
…
$1,150
Unit variable cost of E [($800 × 40%) + ($350 × 60%)]…………………………
…
530
Unit contribution margin of E………………………………………………………
…
$ 620
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
Unit variable cost of E [($800 × 50%) + ($350 × 50%)]…………………………
…
575
Unit contribution margin of E………………………………………………………
…
$ 650
$2,498,600
3,844 units
==
Break-Even Sales (units) = Fixed Costs
Unit Contribution Margin
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-6A
1.
Sales (21,875 × $160) $3,500,000
Cost of goods sold 2,518,750
Gross profit $ 981,250
Expenses:
Selling expenses:
Sales salaries and commissions
[$110,000 + (21,875 × $8)] $285,000
Advertising 40,000
Travel 12,000
Miscellaneous selling expense
[$7,600 + (21,875 × $1)] 29,475
Total selling expenses $ 366,475
Wolsey Industries Inc.
Estimated Income Statement
For the Year Ended December 31, 20Y8
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-6A (Continued)
$525,000
$160 – $120
13,125 units
3. Break-Even Sales (units)
==
=Fixed Costs
Unit Contribution Margin
2. Contribution Margin Ratio = Sales – Variable Costs
Sales
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-6A (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
As a percentage of sales:
$1,400,000
$3,500,000
=Margin of Safety Sales – Sales at Break-Even Point
Sales
40%==
Total Sales
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-1B
Fixed Variable Mixed
Cost Cost Cost Cost
g. X
h. X
i. X
j. X
k. X
l. X
m. X
n. X
o. X
p. X
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-2B
1. Total Variable Cost Variable
Cost Percentage Cost
Cost of goods sold………………
…
$1,280,000 × 75% = $ 960,000
Selling expenses…………………
…
320,000 × 60% = 192,000
Administrative expenses………
…
620,000 × 40% = 248,000
Total variable cost……………
…
$1,400,000
Total Variable Fixed
Cost Cost Cost
2. Number
Total Amount of Units Per Unit
Sales………………………………… $3,150,000 ÷ 35,000 =$90.00
V
…
$820,000
$50 per unit
6. Sales ($3,150,000 + $720,000)…………………………
…
Less: Fixed costs……………………………………
…
$1,090,000
V
ariable costs (43,000* units × $40)……… 1,720,000
Income from operations………………………………
…
$3,870,000
4. =
Fixed Costs
Break-Even Sales (units)
$820,000 + $270,000
Unit Contribution Margin
2,810,000
$1,060,000
3.
==
Break-Even Sales (units) Fixed Costs
Unit Contribution Margin
16,400 units
=
…
…
…
CHAPTER 21 Cost-Volume-Profit Analysis
Prob. 21-2B (Concluded)
8. In favor of the proposal is the possibility of increasing income from operations
from $930,000 to $1,060,000. However, there are many points against the
proposal, including:
a. The break-even point increases by 5,400 units (from 16,400 to 21,800).
c. If future sales remain at the current level, the income from operations of
$930,000 will decline to $660,000.