ullumber Markets imports and sells small bear-shaped piñatas. In planning for the coming year, the company’s owner is evaluating several scenarios. For each scenario under consideration, prepare a contribution margin income statement showing the anticipated operating income. Consider each scenario is applied independently to the original data. Last year’s income statement is as follows: Total Per Unit Sales revenue $756,000 $21.00 Variable expenses 324,000 9.00 Contribution margin 432,000 $12.00 Fixed expenses 175,000 Operating income $257,000 (a) The sales price increases by 10% and sales volume decreases by 6%. (Round per unit answers to 2 decimal places, e.g. 0.38.) Cullumber Markets Income Statement Total Per Unit Sales $enter a dollar amount $enter a dollar amount rounded to 2 decimal places Variable expenses enter a dollar amount enter a dollar amount rounded to 2 decimal places Contribution margin enter a total dollar amount $enter a total dollar amount rounded to 2 decimal places
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Cullumber Markets imports and sells small bear-shaped piñatas. In planning for the coming year, the company’s owner is evaluating several scenarios. For each scenario under consideration, prepare a contribution margin income statement showing the anticipated operating income. Consider each scenario is applied independently to the original data. Last year’s income statement is as follows:
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Total |
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Per Unit |
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Sales revenue |
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$756,000 |
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$21.00 |
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Variable expenses |
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324,000 |
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9.00 |
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Contribution margin |
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432,000 |
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$12.00 |
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Fixed expenses |
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175,000 |
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Operating income |
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$257,000 |
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(a)
The sales price increases by 10% and sales volume decreases by 6%. (Round per unit answers to 2 decimal places, e.g. 0.38.)
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Cullumber Markets |
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Total |
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Per Unit |
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Sales |
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$enter a dollar amount |
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$enter a dollar amount rounded to 2 decimal places |
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Variable expenses |
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enter a dollar amount |
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enter a dollar amount rounded to 2 decimal places |
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Contribution margin |
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enter a total dollar amount |
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$enter a total dollar amount rounded to 2 decimal places |
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Fixed expenses |
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enter a dollar amount |
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Operating income |
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$enter a total dollar amount |
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(b)
The sales price increases by 12% and variable cost per unit increases by 6%. (Round per unit answers to 2 decimal places, e.g. 0.38.)
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Cullumber Markets |
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Total |
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Per Unit |
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Sales |
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$enter a dollar amount |
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$enter a dollar amount rounded to 2 decimal places |
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Variable expenses |
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enter a dollar amount |
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enter a dollar amount rounded to 2 decimal places |
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Contribution margin |
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enter a total dollar amount |
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$enter a total dollar amount rounded to 2 decimal places |
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Fixed expenses |
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enter a dollar amount |
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Operating income |
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$enter a total dollar amount |
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eTextbook and Media
Assistance Used
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Attempts: 0 of 3 used
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(c)
The sales price decreases by 5% and sales volume increases by 15%. (Round per unit answers to 2 decimal places, e.g. 0.38.)
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Cullumber Markets |
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Total |
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Per Unit |
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Sales |
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$enter a dollar amount |
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$enter a dollar amount rounded to 2 decimal places |
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Variable expenses |
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enter a dollar amount |
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enter a dollar amount rounded to 2 decimal places |
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Contribution margin |
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enter a total dollar amount |
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$enter a total dollar amount rounded to 2 decimal places |
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Fixed expenses |
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enter a dollar amount |
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Operating income |
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$enter a total dollar amount |
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eTextbook and Media
Save for Later
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(d)
Fixed expenses increase by $40,000. (Round per unit answers to 2 decimal places, e.g. 0.38.)
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Cullumber Markets |
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Total |
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Per Unit |
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Sales |
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$enter a dollar amount |
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$enter a dollar amount rounded to 2 decimal places |
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Variable expenses |
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enter a dollar amount |
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enter a dollar amount rounded to 2 decimal places |
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Contribution margin |
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enter a total dollar amount |
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$enter a total dollar amount rounded to 2 decimal places |
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Fixed expenses |
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enter a dollar amount |
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Operating income |
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$enter a total dollar amount |
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|
eTextbook and Media
Save for Later
Attempts: 0 of 3 used
Submit Answer
(e)
The sales price increases by 12%, variable cost per unit increases by 15%, fixed expenses increase by $30,000, and sales volume decreases by 15%. (Round per unit answers to 2 decimal places, e.g. 0.38.)
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Cullumber Markets |
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Total |
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Per Unit |
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Sales |
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$enter a dollar amount |
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$enter a dollar amount rounded to 2 decimal places |
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Variable expenses |
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enter a dollar amount |
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enter a dollar amount rounded to 2 decimal places |
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Contribution margin |
|
enter a total dollar amount |
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$enter a total dollar amount rounded to 2 decimal places |
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Fixed expenses |
|
enter a dollar amount |
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|
Operating income |
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$enter a total dollar amount |
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