Objective 3- Apply cost-volume-profit analysis in a multiple-product setting. More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next year. The projected income statement is as follows: Regular Sander Mini-Sander Total S1,500,000 900,000 $ 900,000 Sales Less Variable espenses Contribution margin Less Direct fised expenses Product margin Less: Common fised expenses Operating income $3,000,000 1,500,000 31,200,000 250,000 $ 950,000 S4.800,00 2.700,00 $2,100,00 700,00 S1.400,00 450,000 450,000 600,00 S S00,00 comitaticinblulevolndex.hemitelsaN97813osaror24idr18745624rbidis24anapshotidis2464dockAppluidet. 212 Print Preview Required: 1. Set up the given income statement on a spreadsheet (e.g., Excel). Then, substitute the following sales mixes, and calculate operating income. Be sure to print the results for each sales mix (a through d).
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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