QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below: Total Per Unit Percentage of Sales Sales (25,000 units) $ 2,500,000 $ 100 100% Less variable expenses $ 1,500,000 $ 60 ? % Contribution Margin $ 1,000,000 $ 40 ? % Less Fixed Expenses $ 800,000 Operating Income $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis: Required: Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio. Compute the company’s break-even point in both units and sales dollars.Use the equation method Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below: Total Per Unit Percentage of Sales Sales (25,000 units) $ 2,500,000 $ 100 100% Less variable expenses $ 1,500,000 $ 60 ? % Contribution Margin $ 1,000,000 $ 40 ? % Less Fixed Expenses $ 800,000 Operating Income $ 200,000 Management believes operating income can be further improved and would like you to prepare the following analysis: Required: Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio. Compute the company’s break-even point in both units and sales dollars.Use the equation method Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 4PA
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QUESTION 2- COST-VOLUME -PROFIT (CVP) Analysis Question
matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below:
|
|
Total |
Per Unit |
Percentage of Sales |
|
Sales (25,000 units) |
$ 2,500,000 |
$ 100 |
100% |
|
Less variable expenses |
$ 1,500,000 |
$ 60 |
? % |
|
Contribution Margin |
$ 1,000,000 |
$ 40 |
? % |
|
Less Fixed Expenses |
$ 800,000 |
|
|
|
Operating Income |
$ 200,000 |
|
|
Management believes operating income can be further improved and would like you to prepare the following analysis:
Required:
- Compute the company’s Contribution Margin ( CM ) ratio and variable expense ratio.
- Compute the company’s break-even point in both units and sales dollars.Use the equation method
- Assume that sales increase by $ 600,000 next year. If cost behaviour patterns remain unchanged, by how much will the company’s operating income increase. Use the Contribution Margin (CM) ratio to determine your answer.
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matics Incorporated manufactures flat-screen television sets. The company’s contribution format income statement for 2021 is given below:
|
|
Total |
Per Unit |
Percentage of Sales |
|
Sales (25,000 units) |
$ 2,500,000 |
$ 100 |
100% |
|
Less variable expenses |
$ 1,500,000 |
$ 60 |
? % |
|
Contribution Margin |
$ 1,000,000 |
$ 40 |
? % |
|
Less Fixed Expenses |
$ 800,000 |
|
|
|
Operating Income |
$ 200,000 |
|
|
Management believes operating income can be further improved and would like you to prepare the following analysis:
Required:
- Refer to the original data. Assume that next year, management wants the company to earn a minimum profit of $ 500,000. How many units will have to sold to meet this target profit figure?
- Refer to the original data. Compute the company’s margin of safety in both dollar and percentage form.
- Assume that, through a more intense effort by the sales staff, the company’s sales increase by 12 %. By what percentage would you expect operating income to increase? Verify your answer by preparing a new income statement showing a 12 % increase in sales.
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