Chapter 15, Problem 15.16E

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-a:

To Indicate:

The traditional basis of fixed cost allocation

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-b:

To Indicate:

The effect of total company net income if the MV12 model is discontinued

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-c:

To Calculate:

The Contribution margin ratio for each model

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-d:

To Indicate:

The model that should be given preference for increased sales

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-e:

To Indicate:

The model that should be given preference for increased sales