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 is as follows:
Contribution margin = Sales - Variable cost.
Similarly contribution margin ratio = Contribution/sales
Weighted Average Contribution Margin:
Weighted Average Contribution Margin is calculated for two products with the help of following formula:
To calculate:
The weighted Average contribution margin per unit
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Managerial Accounting
- Contribution margin by segment The following information is for LaPlanche Industries Inc.: Determine the contribution margin for (A) Product YY and (B) West Region.arrow_forwardManufacturing builds and sells switch harnesses for glove boxes. The sales price and variable cost for each follows: Their sales mix is reflected in the ratio 4:4:1. What is the overall unit contribution margin for JJ Manufacturing with their current product mix?arrow_forwardBreak-even for a multiple product firm. can be calculated by dividing total fixed costs by the contribution margin of a composite unit can be calculated by multiplying fixed costs by the contribution margin ratio of a composite unit can only be calculated when the proportion of products sold is the same for all products can be calculated by multiplying fixed costs by the contribution margin ratio of the most common product in the sales mixarrow_forward
- CVP analysis with multiple products assumes that sales will continue at the same mix of products, expressed in either sales units or sales dollars. This assumption is essential, because a change in the product mix will probably change: Multiple Choice The average variable cost per unit. The average sales price per unit. The weighted-average contribution margin (per unit or ratio). The total fixed cost. The average contribution margin (per unit or ratio).arrow_forwardLindstrom Company produces two fountain pen models. Information about its products follows: Product A Product B Sales revenue Less: Variable costs Contribution margin Total units sold Lindstrom's fixed costs total $86,500. Required: $ 76,600 41,400 $ 46,000 5,000 $ 123,400 52,800 $ 91,000 5,000 1. Determine Lindstrom's weighted-average unit contribution margin and weighted-average contribution margin ratio. 2. Calculate Lindstrom's break-even point in units and in sales revenue. 3. Calculate the number of units that Lindstrom must sell to earn a $150,000 profit. 4. Calculate Lindstrom's margin of safety (in units and sales dollars) and margin of safety as a percentage of sales based on the sales data provided in the table above. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the number of units that Lindstrom must sell to earn a $150,000 profit. Note: Do not round your intermediate calculations. Round your answer…arrow_forwardThe XYZ Company has three major products, whose contribution margins are shownbelow in Table 1.1. Table 1.1. Presents description of the mixed products and related contribution margin Description Product A B C Sales Price $ 13 $12 $6.5 Variable cost per unit 8 6 4 CM/Unit 5 6 2.5 Total fixed costs are $100,000. Question (a) the break-even point in units in total and for each product if the three products are sold in the proportions of 30%,50%, and 20%, and (b)the break-even point in total and for each product if the sales mix ratio changes to 50%, 30%, and 20%arrow_forward
- Wimberley Ltd provides the following data regarding its four product lines: A B C D Product Selling price ($) 10 Variable costs per unit ($) Sales mix 35 55 91 3 16 29 65 60 20 15 5 Required Calculate, to two decimal places, the weighted average contribution margin per unit (WACMU).arrow_forwardA CVP graph such as the one shown below is a useful technique for showing relationships among an organization's costs, volume, and profits. 8. Required: Identify the numbered components in the CVP graph. Answer Number 1 Number 2 Number 3 Number 4 Number 5 Number 6 Number 7 Number 8 Number 9 State the effect of each of the following actions on the break-even point. Answer |The unit selling price is increased from $ 18 to $20. |Unit variable expenses are decreased from $12 to $10. |Fixed expenses are increased by $3,000 per period Two thousand more units are sold during the period than were budgeted Due to paying salespersons a commission rather than a flat salary, fixed expenses are reduced by $8,000 per period and unit variable expenses are increased by $3 Due to an increase in the cost of materials, both unit variable expenses and the selling price are increased by $2. Advertising costs are increased by $10,000 per period, resulting in a 10% increase in the number of units sold. Due…arrow_forwardHigh-Low Method Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows: Units Produced Total Costs 1,200 2,330 3,200 $140,400 200,930 218,400 a. Determine the variable cost per unit and the total fixed cost. Variable cost: (Round to the nearest dollar.) Total fixed cost: per unit b. Based on part (a), estimate the total cost for 1,580 units of production. Total cost for 1,580 units:arrow_forward
- If a company makes two products , R1 and R2, what is the fomula for the weighted-average unit contribution margin?arrow_forwardEach of a company's two product lines has a different contribution margin ratio . If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio , which of the following is true ? O a Fixed cost will be constant . . the breakeven point will decrease . Ocall of the answers are true . d the average contribution margin ratio will increase . O e operating income will increasearrow_forwardFollowing information pertains to X Company's two products: 19.17 DigicamVideocam Break-even point-units 240 360 Selling price P 4,500 P14,250 Variable costs 2,250 5,000 What is the weighted average contribution per margin?arrow_forward
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