Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions. To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

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Answer 1

Question

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

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Students have asked these similar questions

Valet Seating Company is currently selling 3,200 oversized bean bag chairs a month at a price of $74 per chair. The variable cost of each chair sold includes $35 to purchase the bean bag chairs from suppliers and a $5 sales commission. Fixed costs are $13,000 per month. The company is considering making several operational changes and wants to know how the change will impact its operating income.

Applesoft produces tablets, laptops and televisions. Applesoft typically sells 1,000 tablets a year. The tablet information is as follows: Selling price per unit $60 Direct material cost per unit Direct labor cost per unit Total allocated overhead (1/4 avoidable if eliminate tablets) $80,000 One fourth of the allocated overhead would be avoidable if the tablets were eliminated. How much would Operating Income change by if Applesoft were to eliminate the tablets? Be sure to include "-" in front of your amount if net income will decrease $30 $15

Your bike helmet company is expecting demand for an additional 4,000 helmets in the upcoming year. While you have the capacity to handle the additional demand, a potential supplier has offered to make the 4,000 helmets for $9 per helmet. Other information from the financial accounting system is listed below. Should you make or buy the helmets? Commuter bike helmet Direct material Direct labor Manufacturing overhead: variable Non-manufacturing overhead: variable Total variable cost Manufacturing overhead: fixed Non-manufacturing overhead: fixed Total fixed cost Total cost Commuter helmet price Machine hour $6.54 $1.89 $1.07 $0.86 $10.36 $1.78 $0.98 $2.76 $13.12 $16.00 0.57

Answer 2

Question

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

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Answer 3

Question

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

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Answer 4

Question

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

Answer 6

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

Answer 7

Chapter 6, Problem 6.1BYP

(a)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement based on current activity.

Answer 8

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

Answer 9

(b)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

Answer 10

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

Answer 11

(c)

To determine

Cost Volume Profit (CVP) Income Statement: The income statement, which highlights the behavior of variable costs and fixed costs and shows the benefit given by each unit of goods produced is called as cost volume profit income statement. It is important for the firm as it helps in making various financial and investment decisions.

To Prepare: A CVP (Cost Volume Profit) income statement, assuming that the company invests in the automated upholstery system.

Answer 12

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

Answer 13

(d)

To determine

Contribution Margin ratio:

The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage. This margin indicates that percentage which is available for sale above the fixed costs and the profit.

To Determine: Contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage, under current policy.

Answer 14

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

Answer 15

(e)

To determine

Break-Even Point:

It is the point of sales at which entity neither earns a profit nor suffers a loss. It can also be said that the point of sales at which sales value of the entity recovers the entire cost of fixed and variable nature is called break-even point.

To Discuss: The implications of adopting new system.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 6 - What is meant by CVP analysis?Ch. 6 - Provide three examples of management decisions...Ch. 6 - Prob. 3Q Ch. 6 - Describe the features of a CVP income statement...Ch. 6 - The traditional income statement for Wheat Company...Ch. 6 - Prob. 6Q Ch. 6 - What is meant by the term sales mix? How does...Ch. 6 - Prob. 8Q Ch. 6 - Prob. 9Q Ch. 6 - Prob. 10Q

Solution Summary: The author explains the CVP income statement, which highlights the behavior of variable costs and fixed costs, and shows the benefit given by each unit of goods produced.

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Chapter 6 Solutions