Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 14E
A company has prepared the following statistics regarding its production and sales at different capacity levels.
Total costs:
- 1. At what point is break-even reached in sales dollars? In units? (Hint: Use the capacity level to determine the number of units.)
- 2. If the company is operating at 60% capacity, should it accept an offer from a customer to buy 10,000 units at $3 per unit?
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A firm manufactures a product that sells for $25 per unit. Variable cost per unit is $2 and fixed cost per period is $1840. Capacity per period is 2000 units.
(a) Develop an algebraic statement for the revenue function and the cost function.
(b) Determine the number of units required to be sold to break even.
(c) Compute the break-even point as a percent of capacity.
(d) Compute the break-even point in sales dollars.
A firm manufactures a product that sells for $16 per unit. Variable cost per unit is $8 and fixed cost per period is $1680. Capacity per period is 2200 units.
(a) Develop an algebraic statement for the revenue function and the cost function.
(b) Determine the number of units required to be sold to break even.
(c) Compute the break-even point as a percent of capacity.
(d) Compute the break-even point in sales dollars.
(a) The revenue function is TR =
(Type an expression using x as the variable. Do not include the $ symbol in your answer.)
The cost function is TC =
(Type an expression using x as the variable. Do not include the $ symbol in your answer.)
(b) The number of units required to be sold to break even is|
units.
(Round up to the nearest whole number.)
(c) The break-even point as a percent of capacity is%.
(Round to two decimal places as needed.)
(d) The break-even point in sales dollars is $
(Round to the nearest cent as needed.)
a) Compute the breakeven sales dollars of cach product assuming the same sales mix remains
constant.
b) Prepare an analysis showing whether Product Z should be eliminated. The amount of
change to net income should be computed.
c) Assume the current demand of cach product is same as the sales volume the company has
for the year. Below is the machine processing time required for cach product.
Product
Machine processing time in hours
i. How many units should the company produce for each product if there is a constraint
of only 24.000 hours of machine processing time in the year.
ii. Compute the highest possible net income camed by the company.
3
2
An accountant has prepared the folowing product-line income statement for the year:
Product
Tatal
No of mts sokd
5,000
4,000
4,000
Saks
Varible enpermes
200,000 S
120,000
100,000 S
60.000
40,000 S
20,000
60,000
40,000
20,000
Cotribution mangin
80,000
40,000
20,000
Fihed expenses
Rert
Depreciin
10,000
12,000
8,000
5.000
6,000
2,000
2,400
3,000…
Chapter 10 Solutions
Principles of Cost Accounting
Ch. 10 - What is the difference between absorption costing...Ch. 10 - Distinguish between product costs and period...Ch. 10 - What effect will applying variable costing have on...Ch. 10 - What are the advantages and disadvantages of using...Ch. 10 - Prob. 5QCh. 10 - What is the difference between gross margin and...Ch. 10 - Why are there objections to using absorption...Ch. 10 - What are common costs?Ch. 10 - How is a contribution margin determined, and why...Ch. 10 - What are considered direct costs in segment...
Ch. 10 - What is cost-volume-profit analysis?Ch. 10 - Prob. 12QCh. 10 - What steps are required in constructing a...Ch. 10 - What is the difference between the contribution...Ch. 10 - What impact does income tax have on the break-even...Ch. 10 - Define differential analysis, differential...Ch. 10 - Prob. 17QCh. 10 - Prob. 18QCh. 10 - What are distribution costs?Ch. 10 - What is the purpose of the analysis of...Ch. 10 - In cost analysis, what determines which costs...Ch. 10 - Yellowstone Fabricators uses a process cost system...Ch. 10 - Using the information presented in E10-1, prepare...Ch. 10 - The chief executive officer of Acadia, Inc....Ch. 10 - The following production data came from the...Ch. 10 - A company had income of 50,000, using variable...Ch. 10 - The fixed overhead budgeted for Ranier Industries...Ch. 10 - Columbia Products Inc. has two divisions, Salem...Ch. 10 - The sales price per unit is 13 for the Voyageur...Ch. 10 - Teton, Inc. sells its only product for 50 per...Ch. 10 - A new product is expected to have sales of...Ch. 10 - Augusta Industries manufactures and sells two...Ch. 10 - A company has sales of 1,000,000, variable costs...Ch. 10 - Prob. 13ECh. 10 - A company has prepared the following statistics...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Redwood Industries needs 20,000 units of a certain...Ch. 10 - Prob. 18ECh. 10 - Biscayne Industries has determined the cost of...Ch. 10 - Roosevelt Enterprises has determined the cost of...Ch. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Arctic Software Inc. has two product lines. The...Ch. 10 - Prob. 7PCh. 10 - The production of a new product required Zion...Ch. 10 - Grand Canyon Manufacturing Inc. produces and sells...Ch. 10 - Prob. 10PCh. 10 - Emerald Island Company is considering building a...Ch. 10 - Royale Aluminum desires an after-tax income of...Ch. 10 - Deuce Sporting Goods manufactures a high-end model...Ch. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 1MCCh. 10 - Denali Company manufactures household products...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?arrow_forwardKlamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?arrow_forwardIf a company has fixed costs of $6.000 per month and their product that sells for $200 has a contribution margin ratio of 30%, how many units must they sell in order to break even? A. 100 B. 180 C. 200 D. 2,000arrow_forward
- A manufacturer has a monthly fixed cost of $87,500 and a production cost of $15 for each unit produced. The product sells for $20/unit. (a) What is the cost function? CX) (b) What is the revenue function? R(x) - (c) What is the profit function? Px) - (d) Compute the profit (loss) corresponding to production levels of 15,000 and 20,000 units. (Input a negative value to indicate a loss) PL1S,000)- P(20,000) =arrow_forwardEXERCISE 5-11 Break-Even Analysis; Target Profit; Margin of Safety; CM Ratio [LO1, LO3, LO5, LO6, LO7] Pringle Company distributes a single product. The company's sales and expenses for a recent month follow: Total Per Unit Sales ...... $600,000 $40 Variable expenses 420,000 28 Contribution margin . Fixed expenses . Net operating income 180,000 $12 150,000 $ 30,000arrow_forwardConsider the following information for a given business. Sale revenue =GHS40,000 VC per unit =GHS20 Activity level =1,000 to break even Required: 1. Determine the TFC 2. Express the contribution as a percentage of sale. 3. The company plans to sale 1,500 unit in the next period. What will be the percentage margin of safety (MoS) 4. What margin should the business employ for planning purposes? 5. What total profit should the business expect in order to achieve it's planned sales?arrow_forward
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