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:
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 units and Breakevens sales
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Managerial Accounting
- 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_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
- 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_forwardProduct Cost Method of Product Costing Voice Com, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,580 cell phones are as follows: Variable costs per unit: Fixed costs: Direct materials $79 Factory overhead $201,200 Direct labor 31 Selling and administrative expenses 68,500 Factory overhead 24 Selling and administrative expenses 19 Total variable cost per unit $153 Voice Com desires a profit equal to a 16% rate of return on invested assets of $601,800. a. Determine the amount of desired profit from the production and sale of 4,580 cell phones. b. Determine the product cost per unit for the production of 4,580 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…arrow_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
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- ABC and CVP Analysis: Multiple Products Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: Expected sales (in cases) Selling price per case Direct labor hours. Machine hours Receiving orders Packing orders Direct labor benefits. Machine costs Receiving department Machine costs Receiving department Packing department Total costs *All depreciation Break-even cases of Rose Fixed $ Break-even cases of Violet Break-even cases of Rose Material cost per case Direct labor cost per case The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhea costs follow. They are classified as fixed or variable with respect to direct labor hours. Rose 242,000 135,500 Break-even cases of Violet 58,000 11,600 $103 33,650 9,400 214,500 242,000 52 99 $53 Violet $12 5,750 $81 2,750 $592,000 $394,000 214,500* 193,060 27 49 $40 Variable $8 $200,940 Required: 1. Using…arrow_forwardCullumber Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income (a) Net income $ (b) Shocker Net Income Tingler $300,000 $500,000 Tingler Net Income $ Total Net Income (c) Why or why not? Compute current net income for Cullumber Company. ta Net income would 151,400 148,600 $ 119,400 S $29,200 Fixed expenses consist of $298,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $30,000 (Tingler), $80,800 (Shocker), and $34,300 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. Shocker 197,000 303,000 229,800 $73,200 Compute net income by product line and in total for…arrow_forwardTotal Cost Concept of Product Pricing Smart Stream Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 8,500 units of cellular phones are as follows: Variable costs: Fixed costs: Direct materials $ 73 per unit Factory overhead $314,500 Direct labor 34 Selling and admin. exp. 110,500 Factory overhead 22 Selling and admin. exp. 17 Total $146 per unit Smart Stream wants a profit equal to a 15% rate of return on invested assets of $932,960. a. Determine the total costs and the total cost amount per unit for the production and sale of 8,500 units of cellular phones. Round the cost per unit to two decimal places. Total costs Cost amount per unit b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. % c. Determine the selling price of cellular phones.…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College