1.
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 compute: Operating income.
3.
To compute: New operating income.
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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- The Matrix Company has three product lines of belts—A, B, and C—with contribution margins of $7, $5, and $4, respectively. The president foresees sales of 400,000 units in the coming period, consisting of 40,000 units of A, 200,000 units of B, and 160,000 units of C. The company’s fixed costs for the period are $1,020,000. Assuming that the product mix is unchanged, how many units of Product A will be sold to breakeven?arrow_forwardThe J&J Company has three product lines ofbelts—A, B, and C—having contribution margins of$3, $2, and $1, respectively. The president foreseessales up to 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and80,000 units of C. The company’s fixed costs for theperiod are $255,000.(a) What is the company’s break-even point inunits, assuming that the given sales mix ismaintained?(b) If the mix is maintained, what is the total contribution margin when 200,000 units are sold?What is the operating income?(c) What would the operating income become if20,000 units of A, 80,000 units of B, and 100,000units of C were sold? What is the new break-evenpoint in units if these relationships persist in thenext period?arrow_forwardThe Matrix Company has three product lines of belts-A, B, and C-with contribution margins of $7, $5, and $4, respectively. The president foresees sales of 400,000 units in the coming period, consisting of 40,000 units of A, 200,000 units of B, and 160,000 units of C. The company's fixed costs for the period are $1,020,000. Assuming that the product mix is unchanged, how many units of Product A will be sold to breakeven? Answer:arrow_forward
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning