Required Information Exercise 3-31 and 3-32 (Static) (LO 3-1) [The following information applies to the questions displayed below.) Warner Clothing is considering the Introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics. %24 Sales price Variable costs Fixed costs 15 per unit 3 per unit 42,000 per month Exercise 3-31 (Static) Basic Decision Analysis Using CVP (LO 3-1) Required: a. What number must Warner sell per month to break even? b. What number must Warner sell per month to make an operating profit of $30,000? a. Break-even sales in units Number of units to be sold
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.
Warner clothing is considering the introudciton fo a new baseball cap for sales by local vendors. The comapny has collected the following price and cost characteristics.
A. What number must Warner sell per month to break even?
B. What number must Warner sell per month to make an operating profit of $30,000?
![Required Information
Exercise 3-31 and 3-32 (Static) (LO 3-1)
[The following information applies to the questions displayed below.]
Warner Clothing is considering the Introduction of a new baseball cap for sales by local vendors. The company has
collected the following price and cost characteristics.
Sales price
Variable costs
Fixed costas
15 per unit
3 per unit
42,000 per month
Exercise 3-31 (Static) Basic Decision Analysis Using CVP (LO 3-1)
Required:
a. What number must Warner sell per month to break even?
b. What number must Warner sell per month to make an operating profit of $30,000?
a. Break-even sales in units
b. Number of units to be sold](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F59e1e845-820e-4fe9-add9-1fc4529c88f2%2F8d4dd560-4fc2-44c9-9286-b0bf4baea7ac%2Fpx2jbqq_processed.jpeg&w=3840&q=75)
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