Cost-Volume-Profit Analysis (CVP Analysis): CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs. Break-Even Point: Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales. Operating Income: Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses. To compute: Break-even points for product A, B and C.

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Answer 1

Question

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

2.

To determine

To compute: Operating income.

3.

To determine

To compute: New operating income.

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Sales mix, three products. The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000. What is the company’s breakeven point in units, assuming that the given sales mix is maintained? If the sales mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income? What would operating income be if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new breakeven point in units if these relationships persist in the next period?

The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000. Q.What would operating income be if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new breakeven point in units if these relationships persist in the next period?

The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000. Q.If the sales mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income?

Answer 2

Question

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

2.

To determine

To compute: Operating income.

3.

To determine

To compute: New operating income.

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Answer 3

Question

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

2.

To determine

To compute: Operating income.

3.

To determine

To compute: New operating income.

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Answer 4

Question

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

2.

To determine

To compute: Operating income.

3.

To determine

To compute: New operating income.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

2.

To determine

To compute: Operating income.

3.

To determine

To compute: New operating income.

Answer 6

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

Answer 7

Chapter 3, Problem 3.49P

1.

To determine

Cost-Volume-Profit Analysis (CVP Analysis):

CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Operating Income:

Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.

To compute: Break-even points for product A, B and C.

Answer 8

2.

To determine

To compute: Operating income.

Answer 9

2.

To determine

To compute: Operating income.

Answer 10

3.

To determine

To compute: New operating income.

Answer 11

3.

To determine

To compute: New operating income.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Give an example of how a manager can decrease...

Solution Summary: The author explains how CVP Analysis measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.

To compute: Operating income.

To compute: New operating income.

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Chapter 3 Solutions