Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
7-41
PROBLEM 7-46 (35 MINUTES)
1.
units 25,000
$750,000 $1,250,000
margin oncontributiUnit
−
=
2.
Number of sales units required
to earn target net profit
margin oncontributiunit
profitnet target costs fixed
+
=
3.
margin oncontributiunit new
costs fixed new
units) (inpoint even-break New
=
4.
Number of sales units required
margin oncontributiunit new
profitnet target costs fixed new
+
=
to earn target net profit, given
Chapter 07 - Cost-Volume-Profit Analysis
7-42
PROBLEM 7-46 (CONTINUED)
5.
margin oncontributiunit
ratio margin-onContributi
=
*Sales price, given in problem.
Let P denote the price required to cover increased direct-material cost and maintain
the same contribution-margin ratio:
Check:
7-43
PROBLEM 7-47 (40 MINUTES)
1.
Memorandum
Date: Today
To: Vice President for Manufacturing, Saturn Game Company
2. New break-even point if automated manufacturing equipment is installed:
Sales price ..................................................................................................... $52
Costs that are variable (with respect to sales volume):
PROBLEM 7-47 (CONTINUED)
3.
Sales (in units) required to show a profit of $280,000:
Number of sales units required
profitnet target cost fixed
+
4.
If management adopts the new manufacturing technology:
PROBLEM 7-47 (CONTINUED)
5.
The controller should include the break-even analysis in the report. The Board of
Directors needs a complete picture of the financial implications of the proposed
equipment acquisition. The break-even point is a relevant piece of information. The
controller should accompany the break-even analysis with an explanation as to
7-46
PROBLEM 7-48 (45 MINUTES)
1.
tonper $450
1,800
$810,000
margin oncontributiUnit
==
2.
Projected net income for sales of 2,100 tons:
3.
Projected net income including foreign order:
Foreign
Order
Regular
Sales
Sales in tons .....................................................................
1,500
1,500
Contribution margin per ton:
7-47
PROBLEM 7-48 (CONTINUED)
4.
New sales territory:
To maintain its current net income, Central Pennsylvania Limestone Company just
needs to break even on sales in the new territory.
5.
Automated production process:
$50 $450
$117,000 $495,000
tonsinpoint even-Break
+
+
=
6.
Changes in selling price and unit variable cost:
$80) ($550 0%)($1,000)(9 margin oncontributiunit New
+−=
Chapter 07 - Cost-Volume-Profit Analysis
7-48
PROBLEM 7-49 (45 MINUTES)
1.
TOLEDO TOOL COMPANY
BUDGETED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X4
Hedge
Clippers
Line
Trimmers
Leaf Blowers
Total
Unit selling price ...............................
$84
$108
$144
Variable manufacturing cost ...........
$39
$ 36
$ 75
2.
(a)
Unit
Contribution
(b)
Sales
Proportion
(a) (b)
Hedge Clippers ...........................................
$30
.25
$ 7.50
Chapter 07 - Cost-Volume-Profit Analysis
7-49
PROBLEM 7-49 (CONTINUED)
Sales proportions:
Sales
Proportion
Total Unit
Sales
Product Line
Sales
Hedge Clippers .............................................
.25
162,500
40,625
3.
(a)
Unit
Contribution
(b)
Sales
Proportion
(a) (b)
Hedge Clippers ........................................................
$30
.20
$ 6.00
*Variable selling cost increases. Thus, the unit contribution decreases to
margin oncontributiunit average-weighted
costs fixed total
evenbreak tosalesunit Total
=
Sales proportions:
Sales
Proportions
Total Unit
Sales
Product Line
Sales
Hedge Clippers ...................................................
.20
200,000
40,000
7-50
PROBLEM 7-50 (35 MINUTES)
1.
(a)
$6
sold units
costs variable sales
margin oncontributiUnit
−
=
(b)
revenue sales
margin oncontributi
ratio margin-onContributi
=
2.
Number of units of sales required
to earn target after-tax net income
margin oncontributiunit
) (1
incomenet tax-aftertarget
costs fixed
−
+
=t
3.
If fixed costs increase by $63,000:
7-51
PROBLEM 7-50 (CONTINUED)
4. Profit-volume graph:
Dollars per year
$1,500,000
$1,000,000
7-52
PROBLEM 7-50 (CONTINUED)
5.
Number of units of sales
) (1
incomenet tax-aftertarget
costs fixed
−
+
=t
