Concept explainers
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
Breakeven Point:
The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no
To calculate:
The Contribution Margin Per unit, Contribution Margin Ratio, and the breakeven point in units
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Managerial Accounting
- Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow: Percentage % of Unit sales Contribution Margin per unit $ Lens A 26 40 Lens B 39 32 Lens C 35 45 Required: 1. Determine the weighted-average contribution margin per unit. 2. Determine the number of units of each product that Tiago must sell to break even if fixed costs are $178,000. 3. Determine how many units of each product must be sold to generate a profit of $66,000.arrow_forwardBest Windows is a small company that installs windows. Its cost structure is as follows: Selling price from each window installation Variable cost of each window installation Annual fixed costs $ $ $ 160,000 Use (a) the equation method and (b) the contribution method to calculate operating income if Best installs 4,000 windows. Use (a) the Equation method to calculate operating income if Best installs 4,000 windows. Begin by determining the formula to calculate the operating income using the equation method. Then, calculate the operating income. (Abbreviation used: FC = Fixed costs, SP = Selling price, VCU = Variable cost per unit, Q = Quantity of units sold.) X X )-( )-( X X 700 600 X = Operating income = Next, use (b) the contribution method to calculate operating income if Best installs 4,000 windows. Begin by determining the formula to calculate the operating income using the contribution method. Then, calculate the operating income. = Operating incomearrow_forwardRequired: 1. Complete the following table. 2. Suppose Sandy Bank sells its canoes for $590 each. Calculate the contribution margin per canoe and the contribution margin ratio. 3. This year Sandy Bank expects to sell 760 canoes for $590 each. Prepare a contribution margin income statement for the company. 4. Calculate Sandy Bank's break-even point in units and in sales dollars. Sandy Bank sells its canoes for $590 each. 5. Suppose Sandy Bank wants to earn $76,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. Sandy Bank sells its canoes for $590 each. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the following table. Note: Round your "Cost per Unit" answers to 2 decimal places. Number of Canoes Produced and Sold Total costs Variable Costs Fixed Costs Total Costs Cost per Unit Required 3 Required 4 Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $ $ $ 500 Required 5 780 0 0.00arrow_forward
- Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow: Lens A Lens B Lens C Contribution Percentage of Margin per Unit Sales 28% 37 35 Unit $ 34 26 39 Required: 1. Determine the weighted-average contribution margin per unit. 2. Determine the number of units of each product that Tiago must sell to break even if fixed costs are $195,000. 3. Determine how many units of each product must be sold to generate a profit of $76,000.arrow_forwardMadlock, Inc. sells a product with a contribution margin of $10 per unit. Fixed costs are $1,800 per month. How many units must Madlock sell to break even? Begin by showing the formula and then entering the amounts to calculate the units Madlock must sell to break even. (Abbreviation used: CM = contribution margin. Complete all input fields. Enter a "0" for items with a zero value.) Target profit ) = Fixed costs ▼ + + HH CM per unit TOD Carmen Required sales in unitsarrow_forwardTiktok Company distributes a lightweight lawn chair that sell for P150 per unit. Variable costs are P60 per unit, and fixed costs total P1,800,000 annually. Required: 1. What is the product's CM Ratio?2. Use the CM ratio to determine the break-even point in sales pesos.arrow_forward
- Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow: Percentage Contribution of Unit Margin per Unit Lens A Lens B Lens C Sales 24% 44 32 $ 50 42 55 Required: 1. Determine the weighted-average contribution margin per unit. 2. Determine the number of units of each product that Tiago must sell to break even if fixed costs are $189,000. 3. Determine how many units of each product must be sold to generate a profit of $66,000. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Units of Lens A Units of Lens B Units of Lens C Determine how many units of each product must be sold to generate a profit of $66,000. Note: Round your intermediate calculations to nearest whole number. Round your answers up to the next whole number. Round weighted-average contribution margin per unit to 2 decimal places. Units Units Unitsarrow_forwardBurnem Inc. manufactures thumb drives and sells them to a distributor. Burnem's total cost and total revenue (in dollars) for x thumb drives are given by the following equations. Total cost = 6(x + 4716) and Total revenue = 15x (a) How many thumb drives must Burnem sell to break even? X = thumb drives (b) What is the selling price of each item? $ (c) What are the fixed costs? $ (d) What is the marginal profit per item? $arrow_forwardCheetah Company manufactures custom-designed skins (covers) for iPods® and other portable electronic devices. Variable costs are $9.20 per custom skin, the price is $19, and fixed costs are $104,860. 1. What is the contribution margin for one custom skin? 2. How many custom skins must Cheetah Company sell to break even? 3. If Cheetah Company sells 13,000 custom skins, what is the operating income? Calculate the margin of safety in units and in sales revenue if 13,000 custom skins are sold.arrow_forward
- Computing breakeven sales No Slip Co. produces sports socks. The company has fixed costs of $91,080 and variable costs of $0.81 per package. Each package sells for $1.80. Requirements Compute the contribution margin per package and the contribution margin ratio. (Round your answers to two decimal places.) Find the breakeven point in units and in dollars using the contribution margin approach.arrow_forwardGladstorm Enterprises sells a product for $53 per unit. The variable cost is $36 per unit, while fixed costs are $5,100. Determine the following: Round your answers to the nearest whole number. a. Break-even point in sales units ___________ units b. Break-even point in sales units if the selling price increased to $66 per unit ____________ unitsarrow_forwardaverage variable cost (cost price) is SAR 9. Thus, every time the store sells a toy car it has SAR A Toy store sells remote control car. The average selling price is SAR 15 and the o remaining after it pays the manufacturer. This SAR 6 is referred to as the unit contribution. The fixed costs of operating the store (its operating expenses) are SAR 100,000 per year. If the total sales units are 20,000. Prepare the Income statement in contribution margin a. format. b. The fixed costs of operating the store (its operating expenses) are SAR100, 000 per year. Find Break-even in units? If the owner desired a profit of SAR 25,000, what will be break-even point in SAR? с.arrow_forward
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