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.
4.
Number of sales units required
*Last year’s profit: ($50)(25,000) – $1,050,000 = $200,000
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:
(a)
Its break-even point will be higher (17,000 units instead of 15,000 units).
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:
Projected fixed costs ……………………………………………………………………
Projected net income ……………………………………………………………………
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
Variable selling cost …………………….
15
12
18
Total variable cost ……………………….
$54
$ 48
$ 93
Contribution margin per unit ………..
$30
$ 60
$ 51
Total contribution margin …………
$1,500,000
$3,000,000
$5,100,000
Fixed manufacturing overhead …….
Fixed selling and
Total fixed costs ………………………
Income before taxes …………………….
Income taxes (40%) ……………………..
2.
(a)
Unit
Contribution
(b)
Sales
Proportion
(a) (b)
Hedge Clippers …………………………………….
$30
.25
$ 7.50
Line Trimmers ………………………………………
.25
15.00
Leaf Blowers ………………………………………..
.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
Line Trimmers ………………………………………..
.25
162,500
40,625
Leaf Blowers ………………………………………….
.50
162,500
3.
(a)
Unit
Contribution
(b)
Sales
Proportion
(a) (b)
Hedge Clippers ………………………………………………..
$30
.20
$ 6.00
Line Trimmers* ………………………………………………..
.20
11.40
Leaf Blowers† ………………………………………………….
.60
*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
Line Trimmers ……………………………………………..
.20
200,000
40,000
Leaf Blowers ……………………………………………….
.60
200,000
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