Introduction To Managerial Accounting
Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
Question
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Chapter 6, Problem 10E
To determine

Break-even analysis: It is an analysis and study of variables with goal to find a point where a company is neither making profits nor suffering any losses.

The Overall contribution margin ratio and overall break-even point in dollar sales.

Expert Solution & Answer
Check Mark

Answer to Problem 10E

Solution:

  1. The Contribution Margin Ratio is 30%
  2. Break-Even point in dollar sales is $ 80,000
  3. Verification of Break-Even point with the construction of the contribution format income statement by showing the appropriate levels of sales for the two products is shown below.
  4.   

Explanation of Solution

A contribution margin ratio is computed by dividing the total contribution margin by total Sales revenue from both products. An overall break-even point is ascertained by dividing the total fixed expense of both products by the overall contribution margin ratio.

1)

  Overall Contribution Margin Ratio = Overall Contribution MarginOverall Sales Revenue                                                         = $30,000$100,000                                                        =  30%

2)Computation of Overall BreakEven Point in dollar salesOverall BreakEven Point in Dollar sales= Total Fixed costOverall Contribution Margin Ratio                                                                  = $24,0000.30                                                                 =$80,000

3)

    Lucido Products contribution format income statement
    ClaimjumperMakeoverTotal
    Sales$30,000$70,000$100,000
    Variable expenses$20,000$50,000$70,000
    Contribution margin$10,000$20,000$30,000
    Fixed expenses$7,200$16,800$24,000
    Net operating income$2,800$3,200$6,000

Introduction To Managerial Accounting, Chapter 6, Problem 10E

Given:

    ClaimjumperMakeoverTotal
    Sales$30,000$70,000$100,000
    Variable expenses$20,000$50,000$70,000
    Contribution margin$10,000$20,000$30,000
    Fixed expenses$24,000
    Net operating income$6,000
Conclusion

Hence, the Overall CM ratio 30% and Overall break-even point in dollar sales is $80,000 in case of Lucido Products. A contribution margin ratio is basically the percentage of contribution margin with sales revenue.

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Chapter 6 Solutions

Introduction To Managerial Accounting

Ch. 6.A - Mixed Cost Analysis and the Relevant Range LOS-10...Ch. 6.A - Prob. 12PCh. 6 - What is the meaning of contribution margin ratio?...Ch. 6 - Prob. 2QCh. 6 - In all respects, Company A and Company B are...Ch. 6 - What is the meaning of operating leverage?Ch. 6 - What is the meaning of break-even point?Ch. 6 - In response to a request from your immediate...Ch. 6 - What is the meaning of margin of safety?Ch. 6 - Prob. 8QCh. 6 - Explain how a shift in the sales mix could result...Ch. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - The Excel work sheet from that appears below is to...Ch. 6 - Prob. 3AECh. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - Prob. 5AECh. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Prob. 11F15Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - The Effect of Cha noes ¡n Activity on Net...Ch. 6 - Prob. 2ECh. 6 - Prepare a Profit Graph L062 Jaffre Enterprises...Ch. 6 - Computing and Using the CM Ratio L063 Last month...Ch. 6 - Changes in Venable Costs, Fixed Costs, Selling...Ch. 6 - Prob. 6ECh. 6 - Lin Corporation has a single product 1ose selling...Ch. 6 - Compute the Margin of Safety LO6-7 Molander...Ch. 6 - Compute and Use the Degree 01 Operating Leverage...Ch. 6 - Prob. 10ECh. 6 - Missing Data; Basic CVP Concepts L061, L069 Fill...Ch. 6 - Prob. 12ECh. 6 - Change in selling price, Sales Volume, Variable...Ch. 6 - Prob. 14ECh. 6 - Operating Leverage 1061. 1068 Magic Realm, Inc.,...Ch. 6 - Prob. 16ECh. 6 - Break-Even and Target Profit Analysis 1064, 1066,...Ch. 6 - Break-Even and Target Profit Analysis; Margin of...Ch. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - CVP Applications; Contribution Margin Ratio:...Ch. 6 - Break-Even and Target Profit Analysis LO6-6, L066...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Sales Mix; Commission Structure; Multiproduct...Ch. 6 - Changes in Cost Structure; Break-Even Analysis;...Ch. 6 - Graphing; Incremental Analysis; Operating Leverage...Ch. 6 - Interpretive Questions on the CVP Graph L062, L065...
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