Topic: Cost-Volume-Profit Analysis General Instructions Assess each of the follo
ID: 2552498 • Letter: T
Question
Topic: Cost-Volume-Profit Analysis
General Instructions
Assess each of the following situations and provide the appropriate answers including the details of all calculations required for each problem.
Problem #1
Brancati Inc. produces and sells two products. Data concerning those products for the most recent month appear below:
Product W07C
Product B29Z
Sales
$
25,000
$
27,000
Variable expenses
$
7,000
$
8,600
Fixed expenses for the entire company were $32,860.
Required:
a. Determine the overall break-even point for the company in total sales dollars.
b. If the sales mix shifts toward Product W07C with no change in total sales, what will happen to the break-even point for the company?
Problem #2
Hawver Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit
$
180.00
Variable expense per unit
$
81.00
Fixed expense per month
$
594,000
Required:
Assume the company's monthly target profit is $19,800. Determine the unit sales to attain that target profit.
Problem #3
Brihon Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit
$
230.00
Variable expense per unit
$
103.50
Fixed expense per month
$
518,650
Required:
a. Assume the company's monthly target profit is $12,650. Determine the unit sales to attain that target profit.
b. Assume the company's monthly target profit is $63,250. Determine the dollar sales to attain that target profit.
Product W07C
Product B29Z
Sales
$
25,000
$
27,000
Variable expenses
$
7,000
$
8,600
Explanation / Answer
Problem # 1
a. Breakeven even point = Fixed costs / Contribution margin percentrage
= 32,860 / 70%
= 46,943
b. The breakeven point decreases as Product W07C has high contribution margin compared to Product B29Z
------------------------------
Problem # 2
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 180 - 81 = 99
Unit sales to attain target profit = (target profit + Fixed costs) / Contribution margin per unit
= (19,800 + 594,000) / 99
= 6,200
------------------------------
Problem # 3
Contribution margin per unit = Selling price per unit - Variable expenses per unit
= 230 - 103.5 = 126.5
Contribution margin percentage = Contribution margin per unit / Selling price per unit
= 126.5 / 230 = 55%
a. Unit sales to attain target profit = (target profit + fixed costs) / contribution margin per unit
= (12,650 + 518,650) / 126.5
= 4,200
b. Dollar sales to attain target profit = (target profit + fixed costs) / contribution margin percentage
= (63,250 + 518,650) / 55%
= 1,058,000
Product W07C Product B29Z Total Sales 25,000 27,000 52,000 Variable expenses 7,000 8,600 15,600 Contribution margin 18,000 18,400 36,400 Contribution margin percentage 72% 68.15% 70%Related Questions
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