Format Painter Font G44 Formatting Table Sityles ng manager for Archaic Image Co
ID: 2595418 • Letter: F
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Format Painter Font G44 Formatting Table Sityles ng manager for Archaic Image Corp. asked you to forecast expected breakeven and profitability levels for its Canvas Picture Division. Although the The is that the division will be profitable next The costing manager sent you the following email: From: Elizabeth Shutter, CEO To: Laura Smith, CPA Date: December 9, 2017 Hi Liz- Pursuant to our phone conversation, I am including the data related to our Canvas Picture Division. Last year we sold 2,500 canvas photos for an average of $200 a unit. However, our competitor-the market leader has market Our sales force believes that we can sell 2,500 camas photos during 2018 at a price point of S 150. · . We calculated a variable cost per unit of $75 . The division incurrs $100,000 of fixed costs annually We would like to eam at least $100,000 in profits (our targeted profit) we would appreciate if you can analyze and provide us with the following 1) The estimated profit that the division will earn if we sell 2,500 canvas photos for $150 2) The estimated profit that the 3) The estimated profit that the 4) The breakeven point (in dollars and units) for the division if we sell each canvas photo for $150 5) The breakeven point (in dollars and units) for the division if we sell each canvas photo for $175 6) The breakeven point (in dollars 7) The sales necessary (in dollars/units) to meet the targeted proft if we sell each canvas photo for $150 8) The sales necessary 9) The sales necessary (in dollars/units) to meet the targeted profit if we sell each canvas photo for $125 division will eam if we sell 2,000 canvas photos for $175 division will earn if we sell 3,000 canvas photos for $125 the division if we sell each canvas photo for $125 (in dollars/units) to meet the targeted profit if we sell each canvas photo for $175 10) The margin of safety (in dollars) if we sell 2,500 canvas photos at $150 Break EvenAnalysis Special Order | Outsourcing | Sell or Process Further : Keep or Drop a segmentExplanation / Answer
Answer 1, 2 & 3. Sales in Units 2,500 2,000 3,000 SP per Unit 150 175 125 Variable Cost per Unit 75 75 75 Contribution per Unit 75 100 50 Total Contribution 187,500 200,000 150,000 Fixed Cost 100,000 100,000 100,000 Net Operating Income 87,500 100,000 50,000 Answer 4, 5 & 6. BEP (In Units) = Fixed Cost / Contribution per Unit BEP (In $) = Fixed Cost / Contribution Margin Ratio Contribution Margin Ratio = Contribution / Sales Sales In Units 2,500 2,000 3,000 Fixed Costs 100,000 100,000 100,000 Contribution Per Unit 75 100 50 Contribution Margin Ratio 50.00% 57.14% 40.00% BEP (In Units) 1,333 1,000 2,000 BEP (In $) 200,000 175,000 250,000 Answer 7, 8 & 9. BEP (In Units + With Target Profit) = (Fixed Cost + Target profit) / Contribution per unit BEP (In $ + With Target Profit) = (Fixed Cost + Target profit) / Contribution Margin Ratio Sales In Units 2,500 2,000 3,000 Fixed Costs 100,000 100,000 100,000 Target Profit 100,000 100,000 100,000 Total 200,000 200,000 200,000 Contribution Per Unit 75 100 50 Contribution Margin Ratio 50.00% 57.14% 40.00% BEP (In Units) 2,667 2,000 4,000 BEP (In $) 400,000 350,000 500,000 Answer 10. Margin of Safety = Sales - BEP (In $) Margin of Safety = $375,000 - $200,000 Margin of Safety = $175,000 (Approx.)
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