CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–4A (FIN MAN); Prob. 6–4A (MAN)
1.
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20-4A (FIN MAN); Prob. 6-4A (MAN) (Continued)
1. Break-Even Units:
–Total Fixed Costs Total Fixed Costs
Break Even Sales (units) = =
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
$75,000
=$250Unit Selling Price – $175U = 1,000units
nit Variable Costs
Break-Even Dollars:
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
Contribution Margin Ratio = =
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–4A (FIN MAN); Prob. 6–4A (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
Variable costs …………………………………………..
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–4A (FIN MAN); Prob. 6–4A (MAN) (Continued)
3.
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20-4A (FIN MAN); Prob. 6-4A (MAN) (Continued)
3. Break-Even Units:
Break-Even Dollars:
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
Contribution Margin Ratio = =
Unit Selling Price Unit Selling Price
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–4A (FIN MAN); Prob. 6–4A (MAN) (Concluded)
4.
(a)
(b)
2,000 units
2,500 units
Sales …………………………………………………….
$ 500,000
$ 625,000
Variable costs ………………………………………..
$(350,000)
$(437,500)
Total costs …………………………………………….
$(458,750)
$(546,250)
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–5A (FIN MAN); Prob. 6–5A (MAN)
(Overall product is labeled E.)
1.
Unit selling price of E [($1,600 × 40%) + ($850 × 60%)]………………………..
$ 1,150
2. 4,030 units of E × 40% = 1,612 units of laptops
4,030 units of E × 60% = 2,418 units of tablets
$620per unit
3,844 units of E × 50% = 1,922 units of laptops
3,844 units of E × 50% = 1,922 units of tablets
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–6A (FIN MAN); Prob. 6–6A (MAN)
1.
Wolsey Industries Inc.
Estimated Income Statement
For the Year Ended December 31, 20Y3
Sales (21,875 × $160)
$ 3,500,000
Cost of goods sold:
Direct materials (21,875 × $46)
Factory overhead [$200,000 + (21,875 × $20)]
637,500
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
Administrative expenses:
Office and officers’ salaries
$132,000
Supplies [$10,000 + (21,875 × $4)]
97,500
Miscellaneous administrative expense
[$13,400 + (21,875 × $1)]
35,275
Total administrative expenses
264,775
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–6A (FIN MAN); Prob. 6–6A (MAN) (Continued)
2.
Sales – VariableCosts
Contribution Margin Ratio = Sales
$875,000
= = 25%
$3,500,000
3.
–
Fixed Costs
Break Even Sales (units) = Unit Contribution Margin
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–6A (FIN MAN); Prob. 6–6A (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
As a percentage of sales:
6.
Contribution Margin
Operating Leverage = Operating Income
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–1B (FIN MAN); Prob. 6–1B (MAN)
Cost
Fixed
Cost
Variable
Cost
Mixed
Cost
a.
X
b.
X
c.
X
d.
X
X
X
g.
i.
X
X
X
l.
X
m.
X
n.
X
o.
X
p.
q.
X
X
s.
X
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–2B (FIN MAN); Prob. 6–2B (MAN)
1.
Total
Variable Cost
Variable
Cost
Percentage
Cost
Cost of goods sold ……………………….
$1,400,000
×
75%
=
$1,050,000
Selling expenses …………………………..
400,000
×
60%
=
240,000
Administrative expenses……………….
387,500
×
80%
=
310,000
Total variable costs …………………
$1,600,000
Total
Variable
Fixed
Cost
Cost
Cost
Administrative expenses……………….
2.
Number
Total Amount
of Units
Per Unit
Sales……………………………………
$ 2,880,000
÷
64,000
=
$ 45.00
64,000
$ 1,280,000
$ 20.00
3.
Break-Even
Fixed Costs
= Unit Contribution Margin
$587,500
= = 29,375 units
$20per unit
Sales (units)
6.
Sales ($2,880,000 + $900,000) ……………………………….
$ 3,780,000
Fixed costs …………………………………………………………..
$ 800,000
Variable costs (84,000* units × $25) ………………………
2,100,000
(2,900,000)
Operating income …………………………………………………
$ 880,000
* ($900,000 ÷ $45) + 64,000
7.
Present operating income …………………………………….
Less additional fixed costs …………………………………..
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–2B (FIN MAN); Prob. 6–2B (MAN) (Concluded)
8. In favor of the proposal is the possibility of increasing operating income
from $692,500 to $880,000. However, there are many points against the
proposal, including:
• The break-even point increases by 10,625 units (from 29,375 to 40,000).
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–3B (FIN MAN); Prob. 6–3B (MAN)
1.
Break-Even
Total Fixed Costs Total Fixed Costs
==
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
$800,000
= = 20,000units
Sales (units)
3.
4.
Sales (32,000 × $150) …………………………...
$ 4,800,000
Total fixed costs …………………………………..
$ 800,000
Total variable costs (32,000 × $110) ……….
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20–4B (FIN MAN); Prob. 6–4B (MAN)
1.
CHAPTER 20 (FIN MAN); CHAPTER 6 (MAN) Cost-Volume-Profit Analysis
Prob. 20-4B (FIN MAN); Prob. 6-4B (MAN) (Continued)
1. Break-Even Units:
– Total Fixed Costs Total Fixed Costs
Break Even Sales (units) = =
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
$225,000
= $200 Unit Selling Price – $125 = 3,000 units
Unit Variable Cost
Break-Even Dollars:
Unit Contribution Margin Unit Selling Price – Unit Variable Cost
Contribution Margin Ratio = =
Unit Selling Price Unit Selling Price