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
Degree of operating leverage:
The Degree of operating leverage shows the relation between change in net operating income and change in sales. The formulas for degree of operating leverage are as follows:
To calculate:
The Degree of operating leverage
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Managerial Accounting
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- Voice 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_forwardalvadores 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_forwardSwitch Manufacturing Co. builds and sells switch harnesses for glove boxes. The sales price and variable cost for each follows: Product selling price per unit variable cost per unit trunk switch $60.00 $28.00 gas door switch $75.00 $33.00 Glove Box Light $40.00 $22.00 Their sales mix is reflected in the ratio 4:4:1. What is the overall unit contribution margin for Switch Manufacturing Co. with their current product mix? If annual fixed costs shared by the three products are $18,840 how many units of each product will need to be sold in order for Switch Manufacturing to break even?arrow_forward
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