Managerial Accounting
Managerial Accounting
5th Edition
ISBN: 9781259176494
Author: John J Wild, Ken Shaw Accounting Professor
Publisher: MCGRAW-HILL HIGHER EDUCATION
Question
Book Icon
Chapter 5, Problem 22E
To determine

Cost-Volume-Profit Analysis:

The cost-volume analysis is the method to analyze the effect on net income due to change in fixed and variable cost and sales volume.

(1)

To identify: Selling price per composite unit.

Expert Solution
Check Mark

Explanation of Solution

Given,
Sales price per window is $200.
Sales price per door is $500.
Variable cost per door is $350.
Variable cost per window is $125.
Fixed cost is $900,000.
Ratio of window and doors is 8:2.

Table represents the selling price per composite unit.

Particulars Ratio ( A ) Selling price per unit ($) ( B ) Total amount ($) ( ( A )×( B ) )
Window 8 200 1,600
Doors 2 500 1,000
Selling price per composite unit
2,600
Table(1) Hence, selling price per composite unit is $2,600.

(2)

To determine

To identify: The variable cost per composite unit.

(2)

Expert Solution
Check Mark

Explanation of Solution

Given,
Variable cost per door is $350.
Variable cost per window is $125.
Ratio of window and doors is 8:2.

Table represents the variable cost per composite unit.

Particulars Ratio ( A ) Variable cost per unit ($) ( B ) Total amount ($) ( ( A )×( B ) )
Window 8 125 1,000
Doors 2 350 700
Variable cost per composite unit
1,700
Table(2) Hence, the variable cost per composite unit is $1,700.

(3)

To determine

To identify: The break-even point in composite units.

(3)

Expert Solution
Check Mark

Explanation of Solution

Given,
Fixed cost is $900,000.

Calculated values (working note),
Unit contribution margin is $900.

Formula to calculate break- even point of sales units,

    Breakeven point= Fixedcost Unitcontributionmargin

Substitute $900,000 for fixed cost and $900 for unit margin.

    Breakeven point= $900,000 $900 =1,000units

Working note:

Calculated values from part (1) and (2),
Selling price per composite unit is $2,600.
Variable cost per composite unit is $1,700.

Calculation of unit contribution margin,

    Unitcontributionmargin=PerunitsellingpricePerunitvariablecost =$2,600$1,700 =$900

Contribution margin per composite unit is $900.

Hence, break-even point of sale is 1,000 composite units.

(4)

To determine

To identify: The number of units of each product sold at break-even point.

(4)

Expert Solution
Check Mark

Explanation of Solution

Calculated values from part (1) and (2) and (3),
Selling price per composite unit is $2,600.
Variable cost per composite unit is $1,700.
Break-even point of sale is 1,000 composite units.

Formula to calculate break-even point for windows,

    Break-evenpointforwindows=( Break-evenpointofcompositeunit × Salesamountofwindows Sellingpricepercompositeunit )

Substitute 1,000 units for break-even point of composite unit, $1,600 for sales amount of windows and $2,600 for selling price per composite units.

    Break-evenpointforwindows=1,000units× $1,600 $2,600 =1,000units×0.615 =615units

Formula to calculate break-even point for doors,

    Break-evenpointfordoors=( ( Break-evenpointofcompositeunit ) ×( Salesamountofdoors Sellingpricepercompositeunit ) )

Substitute 1,000 units for break-even point of composite unit, $1,000 for sales amount of doors and $2,600 for selling price per composite units.

    Break-evenpointfordoors=1,000units× $1,000 $2,600 =1,000units×0.385 =385units

Hence, break-even point of windows and doors are 615 units or 385 units.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 5 Solutions

Managerial Accounting

Ch. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQCh. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - Prob. 16DQCh. 5 - Prob. 17DQCh. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - APPLE Should Apple use single product or...Ch. 5 - Prob. 21DQCh. 5 - Prob. 1QSCh. 5 - Prob. 2QSCh. 5 - The following information is available for a...Ch. 5 - Prob. 4QSCh. 5 - Prob. 5QSCh. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Prob. 9QSCh. 5 - Prob. 10QSCh. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Prob. 13QSCh. 5 - Prob. 14QSCh. 5 - Prob. 15QSCh. 5 - Prob. 16QSCh. 5 - Prob. 17QSCh. 5 - Following are five graphs representing various...Ch. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Copper Company expect to sell 200,000 units of its...Ch. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Prob. 23ECh. 5 - Prob. 24ECh. 5 - Prob. 25ECh. 5 - The following costs result from the production and...Ch. 5 - Prob. 2PSACh. 5 - Prob. 3PSACh. 5 - Astro Co. sold 20,000 units of its only product...Ch. 5 - Prob. 5PSACh. 5 - Prob. 6PSACh. 5 - Patriot Co. manufactures and sells three products:...Ch. 5 - Prob. 1PSBCh. 5 - Prob. 2PSBCh. 5 - Prob. 3PSBCh. 5 - Rivera Co. sold 20,000units of its only product...Ch. 5 - Prob. 5PSBCh. 5 - Prob. 6PSBCh. 5 - Prob. 7PSBCh. 5 - Prob. 5SPCh. 5 - Apple offers extended service contracts that...Ch. 5 - Prob. 2BTNCh. 5 - Prob. 3BTNCh. 5 - Prob. 4BTNCh. 5 - Prob. 5BTNCh. 5 - Prob. 6BTNCh. 5 - Fast Yeti Custom Tees, Launched by entrepreneurs...Ch. 5 - Prob. 8BTNCh. 5 - Access and review Samsungs website...
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education