Costos

CHAPTER 3
COST-VOLUME-PROFIT ANALYSIS

NOTATION USED IN CHAPTER 3 SOLUTIONS

SP: Selling price
VCU: Variable cost per unit
CMU: Contribution margin per unit
FC: Fixed costs
TOI: Target operating income

3-16 (10 min.) CVP computations.

| | |Variable |Fixed |Total |Operating |Contribution |Contribution|
| |Revenues |Costs |Costs |Costs |Income |Margin |Margin % |
|a. |$2,000 |$ 500 |$300 |$ 800 |$1,200 |$1,500 |75.0% |
|b. |2,000 |1,500 |300 |1,800 |200 |500|25.0% |
|c. |1,000 |700 |300 |1,000 |0 |300 |30.0% |
|d. |1,500 |900 |300 |1,200 |300 |600 |40.0% |

3-17 (10–15 min.) CVP computations.

1a. Sales ($30 perunit × 200,000 units) $6,000,000
Variable costs ($25 per unit × 200,000 units) 5,000,000
Contribution margin $1,000,000

1b. Contribution margin (from above) $1,000,000
Fixed costs 800,000
Operating income $ 200,000

2a. Sales (from above) $6,000,000
Variable costs ($16 per unit × 200,000 units) 3,200,000
Contribution margin$2,800,000

2b. Contribution margin $2,800,000
Fixed costs 2,400,000
Operating income $ 400,000

3. Operating income is expected to increase by $200,000 if Ms. Schoenen’s proposal is accepted.
The management would consider other factors before making the final decision. It is likely that product quality would improve as a result of using state of the art equipment. Due toincreased automation, probably many workers will have to be laid off. Patel’s management will have to consider the impact of such an action on employee morale. In addition, the proposal increases the company’s fixed costs dramatically. This will increase the company’s operating leverage and risk.

3-18 (35–40 min.) CVP analysis, changing revenues and costs.

1a. SP = 8% × $1,000 = $80 perticket
VCU = $35 per ticket
CMU = $80 – $35 = $45 per ticket
FC = $22,000 a month

Q = [pic] = [pic]

= 489 tickets (rounded up)

1b. Q = [pic] = [pic]



= [pic]

= 712 tickets (rounded up)

2a. SP = $80 per ticket
VCU = $29 per ticket
CMU = $80 – $29 = $51 per ticket
FC = $22,000 a month

Q = [pic] = [pic]

= 432 tickets (rounded up)

2b. Q = [pic] =[pic]

= [pic]
= 628 tickets (rounded up)

3a. SP = $48 per ticket
VCU = $29 per ticket
CMU = $48 – $29 = $19 per ticket
FC = $22,000 a month

Q = [pic] = [pic]
= 1,158 tickets (rounded up)

3b. Q = [pic] = [pic]

= [pic]

= 1,685 tickets (rounded up)

The reduced commission sizably increases the breakeven point and the number of tickets required to yield atarget operating income of $10,000:

8%
Commission Fixed
(Requirement 2) Commission of $48

Breakeven point 432 1,158

Attain OI of $10,000 628 1,685

4a. The $5 delivery fee can be treated as either an extra source of revenue (as done below) or as a cost offset. Either approach increases CMU $5:

SP = $53 ($48 + $5) per ticket
VCU = $29 per ticket
CMU =$53 – $29 = $24 per ticket
FC = $22,000 a month

Q = [pic] = [pic]



= 917 tickets (rounded up)

4b. Q = [pic] = [pic]

= [pic]

= 1,334 tickets (rounded up)

The $5 delivery fee results in a higher contribution margin which reduces both the breakeven point and the tickets sold to attain operating income of $10,000.


3-19 (20 min.) CVP exercises.


| |...