shop's break-even sales volume in dollars? Assume a constant bicycles of each type must be sold to earn a target net income
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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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- Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: product type sales price price invoice cost sales commission high quality 1850 840 100 medium quality 920 620 40 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore income taxes.)a. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.b. How many bicycles of each type must be sold to earn a target net income of $126,750? Assume a constant sales mix.Stable Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $12 per case and sells to retail customers at a list price of $14.80 per case. Data pertaining to the five customers are: E (Click the icon to view the data.) Stable Paper Delivery's five activities and their cost drivers are as follows: E (Click the icon to view the activities and cost drivers.) Read the requirements. Requirement 1. Compute the customer-level operating income of each of the five retail Begin by calculating each customer's gross margin. Then calculate the operating incom minus sign for operating losses.) Requirements 1 2 1. Compute the customer-level operating income of each of the five retail customers now being examined (1, 2, 3, 4, and 5). Comment on the results. 2. What insights do managers gain by reporting both the list selling price and the actual selling price for each customer? 3. What factors should managers consider in deciding whether to drop one…Tim's Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type High-quality Medium-quality ... Sales Price $500 300 Invoice Cost Sales Commission $275 $25 135 15 Three-quarters of the shop's sales are medium-quality bikes. The shop's annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.) Required: 1. Compute the unit contribution margin for each product type. 2. What is the shop's sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shop's break-even sales volume in dollars? Assume a constant sales mix. 5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix.
- Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type Sales Price Invoice Cost Sales CommissionHigh-quality ....................................$500 $275 $25Medium-quality .............................. 300 135 15 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.)Required:1. Compute the unit contribution margin for each product type.2. What is the shop’s sales mix?3. Compute the weighted-average unit contribution margin, assuming a constant sales mix.4. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix.Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. Thepianos cost, on the average, $2,450 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianosto its customers at an average price of $3,125 each. The selling and administrative costs that the companyincurs in a typical month are presented below:Costs Cost FormulaSelling:Advertising ................................................ $700 per monthSales salaries and commissions .............. $950 per month, plus 8% of salesDelivery of pianos to customers ............... $30 per piano soldUtilities ...................................................... $350 per monthDepreciation of sales facilities .................. $800 per monthAdministrative:Executive salaries .................................... $2,500 per monthInsurance .................................................. $400 per monthClerical ..................................................... $1,000 per month, plus…A manufacturer of vertical blinds purchases raw materials for $17.00 per set of blinds and has a markup of $130.00 per set of blinds. The operating profit is 60.00% of the selling price. What are the overhead expenses per set of blinds? A clothing merchant purchases a shipment of clothes for $38,000.00 with discounts of 11% and 5%. He sells it to a customer at a price which includes 22% profit on selling price and overhead expenses of 23% on selling price. How much did it cost him to purchase the container of clothes? What was the selling price of the container of clothes? Calculate the break-even selling price.
- Native Wood Products Ltd sells hand-made coffee tables. The shop owner has divided sales into two categories according to the type of wood used in the tables, as follows: Product type Kahikatea Rimu Sales price $2,000 $1,200 Costs $1,200 $520 Sales commission $100 $60 Seventy percent (70%) of the shop's sales are rimu tables. The shop's annual fixed costs are $161,000. Calculate the weighted average contribution margin, assuming the sales mix stays the same.House of Organs, Inc., purchases organs from a well-known manufacturer and sells them at the retail level. The organs sell, on the average, for $2,500 each. The average cost of an organ from the manufacturer is $1,500. The costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling: Advertising . . . . . . . . . . . . . . . . . . . . . . . $950 per monthDelivery of organs . . . . . . . . . . . . . . . $60 per organ soldSales salaries and commissions . . . . . . $4,800 per month, plus 4% of salesUtilities . . . . . . . . . . . . . . . . . . . . . . . . . . $650 per monthDepreciation of sales facilities . . . . . . . . $5,000 per month Administrative: Executive salaries . . . . . . . . . . . . . . . $13,500 per monthDepreciation of…Please explain the step so I can understand. Gobblecakes is a bakery that specializes in cupcakes. The annual fixed cost to make cupcakes is $18,000. The variable cost including ingredients and labor to make a cupcake is $0.90. The bakery sells cupcakes for $3.20 apiece. (a). If the bakery sells 12,000 cupcakes annually, determine the total cost, total revenue, and profit. (b). How many cupcakes will the bakery need to sell in order to break even?
- Lowes Farm Supply paid $73 for a large bag of fertilizer. Expenses are 13% of cost and the profit is 21% of cost. Round the answers to the nearest cent if necessary. 1) What is the regular selling price? 2) To help clear inventory, the fertilizer was sold at break-even during a sale. What is the break-even selling price?Native Wood Products Ltd sells hand-made coffee tables. The shop owner has divided sales into two categories according to the type of wood used in the tables, as follows: Product type Kahikatea Rimu Sales price $2,000 $1,200 Costs $1,200 $520 Sales commission $100 $60 Seventy percent (70%) of the shop's sales are rimu tables. The shop's annual fixed costs are $161,000. What is the shop's breakeven sales revenue in dollars?Boston Home Center (BHC) offers customers the use of a truck at $64 per trip to take purchased merchandise home. BHC reports the following information about the trucks it has for customer usage: Cost Driver Rate Cost Driver Volume Resources used Operation $ 0.55 per mile 46,200 miles Administration 25.00 per trip 1,874 trips Resources supplied Operation $ 35,400 Administration $ 62,400 Sales revenue totaled $80,000. Required: Prepare a traditional income statement. Prepare an activity-based income statement. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a traditional income statement. Traditional Income Statement Sales revenue Operation costs Administration costs Operating profit Activity-Based Income Statement Resources Used Unused Resource Capacity…