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
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 for each product
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Managerial Accounting
- Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model 301. The sales price and variable costs for these three models are as follows: The current product mix is 4:3:2. The three models share total fixed costs of $430,000. Calculate the sales price per composite unit. What is the contribution margin per composite unit? Calculate Manatoahs break-even point in both dollars and units. Using an income statement format, prove that this is the break-even point.arrow_forwardSalvador Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows: Their sales mix is reflected in the ratio 7:3:2. If annual fixed costs shared by the three products are $196,200, how many units of each product will need to be sold in order for Salvador to break even?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. If annual fixed costs shared by the three products are $1 8840 how many units of each product will need to be sold in order forJj to break even?arrow_forward
- Blue Company developed the following information for its product: Per Unit Sales price $90 Variable cost 63 Contribution margin $27 Total fixed costs $1,215,000 Required:Answer the following independent questions and show computations using the contribution margin technique to support your answers. How many units must be sold to break even? 2. What is the total sales that must be generated for the company to earn a profit of $60,000?arrow_forwardComputing 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_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_forward
- Salvadores Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows: Product Selling Priceper Unit Variable Costper Unit Snowboards $300 $160 Skis $420 $210 Poles $60 $30 Their sales mix is reflected in the ratio 6:4:1. What is the overall unit contribution margin for Salvadores with their current product mix? Overall Unit Contribution Margin $fill in the blank 1arrow_forwardAnna Inc. sells two products as follows: Product A Product B Units sold 3,800 4,750 Selling price per unit $300 $450 Variable costs per unit $120 $270 The company has the following fixed costs: Product A, $613,000, Product B, $1,023,000, and common fixed costs of $372,800. Using the above information answer the following questions. What is the package contribution margin? What is the break-even in packages? How many units of Product A are required to break-even? How many units of Product B are required to break-even?arrow_forwardSalvador Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows: Product Selling Priceper Unit Variable Costper Unit Snowboards $340 $150 Skis $380 $200 Poles $60 $30 Their sales mix is reflected in the ratio 7:3:2. If annual fixed costs shared by the three products are $250,900. Determine the break-even point in sales dollars. Break-even point $fill in the blank 1arrow_forward
- 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_forwardAnna Inc. sells two products as follows: Product A Product B Units sold 3,800 4,750 Selling price per unit $300 $450 Variable costs per unit $120 $270 The company has the following fixed costs: Product A, $613,000, Product B, $1,023,000, and common fixed costs of $372,800. Using the above information answer the following questions. What is the package contribution margin? HINT: this is a dollar value so please round to the nearest penny. What is the break-even in packages? How many units of Product A are required to break-even? How many units of Product B are required to break-even?arrow_forwardVoice Com, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,480 cell phones are as follows: Variable costs per unit: Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit 161 34 24 19 $138 Fixed costs: Factory overhead Selling and administrative expenses Voice Com desires a profit equal to a 14% return on invested assets of $600,700. a. Determine the amount of desired profit from the production and sale of 5,400 cell phones. 84,098 ✔ $201,600 71,600 b. Determine the product cost per unit for the production of 5,480 cell phones. Round your answer to the nearest whole dollar. 156 ✔ per unit c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places. X%arrow_forward
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