# Exercises and Problems Cvp

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CVP: EXERCISES AND PROBLEMS 1. Gilley, Inc., sells a single product. The company's most recent income statement is given below. Sales (4,000 units) Less variable expenses Contribution margin Less fixed expenses Net income Required: a. b. Contribution margin per unit is If sales are doubled to \$240,000, total variable costs will equal If sales are doubled to \$240,000, total fixed costs will equal If 10 more units are sold, profits will increase by Compute how many units must be sold to break even. Compute how many units must be sold to achieve profits of \$20,000. \$ _______________ per unit \$120,000 (68,000) 52,000 (40,000) \$ 12,000 \$ _______________ c. \$ _______________ \$ _______________ # _______________ d. e. f. # _______________…show more content…
Answer: a. N = Breakeven units \$30N – \$20N – \$10,000 – \$8,000 = 0 \$10N – \$18,000 = 0 N = \$18,000/\$10 = 1,800 batteries b. Margin of safety = \$60,000 – (\$30 x 1,800) = \$6,000 3 Create PDF files without this message by purchasing novaPDF printer (http://www.novapdf.com) c. N = Breakeven units \$30N – \$24N – \$10,000 – \$8,000 = 0 \$6N – \$18,000 = 0 N = \$18,000/\$6 = 3,000 batteries d. N = Breakeven units \$33N – \$20N – \$9,000 – \$7,900 = 0 \$13N – \$16,900 = 0 N = \$16,900/\$13 = 1,300 batteries 4 Create PDF files without this message by purchasing novaPDF printer (http://www.novapdf.com) 6. Furniture, Inc., sells lamps for \$30. The unit variable cost per lamp is \$22. Fixed costs total \$9,600. Required: a. What is the contribution margin per lamp? b. What is the breakeven point in lamps? c. How many lamps must be sold to earn a pretax income of \$8,000? d. What is the margin of safety, assuming 1,500 lamps are sold? Answer: a. Contribution margin per lamp = \$30 – \$22 = \$8 b. N = Breakeven point in lamps \$30N – \$22N - \$9,600 = 0 \$8N – \$9,600 = 0 N = \$9,600/\$8 = 1,200 lamps c. N = Target sales in lamps \$30N – \$22N – \$9,600 – \$8,000 = 0 \$8N – \$17,600 = 0 N = \$17,600/\$8 = 2,200 lamps d. Margin of safety = Sales – Breakeven sales = (\$30.00 x 1,500) – \$36,000 = \$9,000 7. Yurus Manufacturing Company produces two products, X and Y. The following information is