BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Solutions

Chapter
Section
BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Break-even sales and cost-volume-profit graph
For the coming year, Bernardino Company anticipates a unit selling price of $85, a unit variable cost of $15. and fixed costs of $420,000.

Instructions

Determine the probable operating income (loss) if sales total 8.000 units.

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:

Contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Breakeven Point:

The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no profits no loss. Breakeven point in $ is calculated with the help of following formula:

  Breakeven point (units) = Total Fixed Costs(Sales Price Per unit -Variable Cost per unit) 

To Calculate:

The Operating income (loss) at 8000 unit's sales

Explanation

The Operating income (loss) at 8000 unit's sales is calculated as follows:

    Selling Price per unit (A) $ 85
    Variable Cost per unit (B) $ 15
    Contribution Margin Per unit (C) = (A-B) $ 70

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Once you have a job, what steps can you take to be successful?

Foundations of Business (MindTap Course List)

What is a database?

Accounting Information Systems

What is inflation and what causes it?

Principles of Microeconomics (MindTap Course List)

Next, we need to calculate MMMs cost of debt. We can use different approaches to estimate it One approach is to...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Explain whether the following statement is true or false: Only weak companies issue debentures.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)