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 breakeven point in units and Sales
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Managerial Accounting
- Lindstrom 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_forwardAnalyzing profitability Father Furniture Company manufactures and sells oak tables and chairs. Price and cost data for the furniture follow: Father Furniture has three sales representatives: Adam, Ben, and Caleb. Adam sold 100 tables With 6 chairs each. Ben sold 110 tables With 4 chairs each. Caleb sold 80 tables with 8 chairs each. Requirements Calculate the total contribution margin and the contribution margin ratio for each sales representative (round to two decimal places). Which sales representative has the highest contribution margin ratio? Explain Whyarrow_forwardProduct Profitability Analysis Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVS), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products: Conquistador Hurricane Sales price $4,800 $3,200 Variable cost of goods sold (3,020) (2,140) Manufacturing margin $1,780 $1,060 Variable selling expenses (964) (548) Contribution margin $816 $512 Fixed expenses (380) (200) Operating income $436 $312 In addition, the following sales unit volume information for the period is as follows: Conquistador 2,800 Hurricane 2,000 Sales unit volume a. Prepare a contribution margin by product report. Compute the contribution margin ratjo for each product as a whole percent. Galaxy Sports Inc. Contribution Margin by Productarrow_forward
- Verify that the mix of units to be sold at the break-even point for each product line will generate a zero net income by computing the total contribution margin for each product line. $ $ $ $ GIVEN: Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost…arrow_forwardProduct Cost Method of Product Costing MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,950 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $70 Factory overhead $199,700 Direct labor 35 Selling and administrative expenses 69,300 Factory overhead 27 Selling and administrative expenses 21 Total variable cost per unit $153 MyPhone desires a profit equal to a 15% rate of return on invested assets of $598,500. a. Determine the amount of desired profit from the production and sale of 4,950 cell phones. b. Determine the product cost per unit for the production of 4,950 of cell phones. Round your answer to the nearest whole dollar. per unit c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places. d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar. Total Cost per unit Markup per unit…arrow_forwardProduct Cost Method of Product Costing MyPhone, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,950 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $70 Factory overhead $199,700 Direct labor 35 Selling and administrative expenses 69,300 Factory overhead 27 Selling and administrative expenses 21 Total variable cost per unit $153 MyPhone desires a profit equal to a 15% rate of return on invested assets of $598,500. a. Determine the amount of desired profit from the production and sale of 4,950 cell phones. $ 89,775 V b. Determine the product cost per unit for the production of 4,950 of cell phones. Round your answer to the nearest whole dollar. $ 853,100 X per unit c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places. 30.83 d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar. Total…arrow_forward
- SBD Phone Company sells its waterproof phone case for $122 per unit. Fixed costs total $262,000, and variable costs are $52 per unit. Compute the units of product that must be sold to earn pretax income of $228,000. Units to be sold to achieve targeted income Choose Numerator: Choose Denominator: Units to Achieve Target Units to achieve target IIarrow_forwardTotal Cost Method of Product Pricing Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 3,500 units of cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $ 77 Factory overhead $134,700 Direct labor 35 Selling and administrative expenses 47,300 Factory overhead 23 Selling and administrative expenses 19 Total variable cost per unit $154 Smart Stream desires a profit equal to a 14% return on invested assets of $422,300. a. Determine the total costs and the total cost amount per unit for the production and sale of 3,500 cellular phones. Round the cost per unit to two decimal places. Total cost Total cost amount per unit b. Determine the total cost markup percentage for cellular phones. Round your answer to two decimal places. c. Determine the selling price of cellular phones. Round to the nearest cent. per cellular phonearrow_forwardProduct cost method of product costing Smart Stream Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows: Smart Stream desires a profit equal to a 30% return on invested assets of 1,200,000. A. Determine the amount of desired profit from the production and sale of 10,000 cell phones. B. Determine the product cost per unit for the production of 10,000 cell phones. C. Determine the product cost markup percentage for cell phones. D. Determine the selling price of cell phones.arrow_forward
- Manufacturing 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_forwardGalaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products: In addition, the following sales unit volume information for the period is as follows: a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each. b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?arrow_forwardTotal cost method of product pricing Based on the data presented in Exercise 17, assume that Smart Stream Inc. uses the total cost method of applying the cost-plus approach to product pricing. A. Determine the total costs and the total cost amount per unit for the production and sale of 10,000 cellular phones. B. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. C. Determine the selling price of cellular phones. (Round markup to the nearest dollar.)arrow_forward
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