CVP
The last out post is-breakevenpoint
The
Last Outpost is a tourist stop in a western resort community. Kerry Yost, the
owner of the shop, sells hand-woven blankets for an average price of $30 per
blanket. Kerry buys the blankets from weavers at an average cost of $21. In
addition, he has selling expenses of $3 per blanket. Kerry rents the building
for $300 per month and pays one employee a fixed salary of $500 per month.
Determine
the number of blankets Kerry must sell to break even.
The
company sells lawnmowers for $895 each. The variable cost per lawnmower is
$520. The company's monthly fixed costs are $84,500. Using the C-V-P equation,
compute the amount of profit the company will have for a month in which the
company sells 375 lawnmowers.
The
company has a variable cost ratio of 65% and monthly fixed costs of $91,000.
What is the company's break-even point in terms of sales dollars?
Perrson
Company makes two types of backpacks. Data for the company's activity during a
typical month are presented below:
School
Hiker Model Model
Sales
units 40,000 40,000
Selling
price per unit $6 $18
Variable
expense per unit $2 $10
The
company's total fixed expenses are $80,000. There are no beginning or ending
inventories.
A.
What is the per unit contribution margin for each of the two models?
B.
What is the break-even point in terms of sales dollars if the sales mix remains
constant?
Break-even
point (in sales) = Fixed cost * selling price per unit Contribution margin
C.
If the sales mix is changed to 60,000 units of the school model and 20,000
units of the hiker model, what will be the break-even point in terms of sales
dollars?
Berry
Company produces a single product. The projected income statement for the
coming year is as follows:
Sales
(50,000 units @ $45) $2,250,000
Less:
Variable costs 1,305,000
Contribution
Margin $ 945,000
Less:
Fixed costs 812,700
Operating
Income $ 132,300
a.
Compute unit margin and the units that must be sold to break even.
b.
Suppose 30,000 units are sold above break even. What is the operating income?
c.
Compute the contribution margin ratio and the break even point in dollars.
Suppose that that revenue is $200,000 more than expected. What would the total
operating income be?
WHAT
IS THE OPERATING INCOME IF THE REVENUE INCREASES BY $200,000?
Calculate
the accounting break-even point for the following firm: revenues of $ 700,000,
$ 100,000 fixed
costs, $ 75,000 depreciation, 60% variable costs, and a 35 % tax rate. What
happens to the break even
if a trade -off is made which increases fixed costs by 30,000 and decreases
variable costs to 50% of
sales?
Hess,
Inc. sells a single product with a contribution margin of $12 per unit and
fixed costs of $74,400 and sales for the current year of $100,000. How much is
Hess’s break even point?
a.
4,600 units b. $25,600 c. 6,200 units d.
2,133 units
Disney’s
variable costs are 30% of sales. The company is contemplating an advertising
campaign that will cost $22,000. If sales are expected to increase $40,000, by
how much will the company’s net income increase?
a.
$18,000 b. $28,000 c. $12,000 d. $6,000
H55
Company sells two products, beer and wine. Beer has a 10 percent profit margin
and wine has a 12 percent profit margin. Beer has a 27 percent contribution
margin and wine has a 25 percent contribution margin. If other factors are
equal, which product should H55 push to customers?
a.
Beer b. Wine c. Selling either results in the same additional income for the
company d. It should sell an equal quantity of both.
Hartley,
Inc. has one product with a selling price per unit of $200, the unit variable
cost is $75, and the total monthly fixed costs are $300,000. How much is
Hartley’s contribution margin ratio?
a.
62.5% b.
37.5% c.
150% d.
266.6%
SOLUTION PREVIEW
Determine the number of blankets
Kerry must sell to break even.
Break-even sales (in
units) = fixed cost .
Sales price per unit – VC per unit
Variable cost per
blanket :
Cost of buying the
blanket 21
Selling expenses per
blanket 3
----
Variable cost per
blanket 24
----
Fixed costs:
Rent of the building 300
Fixed salary 500
