1.
Cost-Volume-Profit Analysis (CVP Analysis):
CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.
Operating Income:
Operating income is the revenue generated from the routine course of business operations. Alternatively operating income can also be referred as the earnings before interest and taxes (EBIT) which is the sum total of income after deduction of operational expenses.
To compute: Units of sunglasses to be sold to reach break-even point.
2.
To compute: Sunglasses to be sold to earn operating income of $5,300 per month.
3.
To compute: Sunglasses to be sold to earn operating income of $5,300 per month.
4.
To compute: Preferred sales level to pay monthly rent.
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Chapter 3 Solutions
EBK HORNGREN'S COST ACCOUNTING
- Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?arrow_forwardMarkson and Sons leases a copy machine with terms that include a fixed fee each month plus acharge for each copy made. Markson made 9,000 copies and paid a total of $480 in January. In April, they paid $320 for 5,000 copies. What is the variable cost per copy if Markson uses the high-low method to analyze costs?arrow_forwardClassical Glasses operates a kiosk at the local mall, selling s unglasses for $30 each. Classical Glasses currently pays $1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at $10 per hour. The store shares a manager with a neighboring kiosk and pays 50% of the manager’s annual salary of $60,000 and benefits of $12,000. The wholesale cost of the sunglasses to the company is $10 a pair. Q.If Classical Glasses wants to earn an operating income of $5,300 per month, how many sunglasses does the store need to sell?arrow_forward
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- William Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base salary of $1,510 per month. One of the barbers serves as the manager and receives an extra $580 per month. In addition to the base salary, each barber also receives a commission of $8.40 per haircut. Other costs are as follows. Advertising Rent Barber supplies Utilities Magazines William currently charges $18.00 per haircut. (a) Determine the unit variable costs per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 2.25.) Your answer is correct.. Total unit variable cost per haircut Total fixed costs (b) $300 per month $1,020 per month $0.45 per haircut $150 per month plus $0.15 per haircut $30 per month eTextbook and Media (d) V Your answer is correct. Break-even point Break-even point sales $ Compute the break-even point in sales units and in sales dollars. eTextbook and Media Your answer is incorrect. $ Net income $ $ 1070 19260 9 9630 haircuts Determine…arrow_forwardMake or Buy - Home Grocery (HG) provides home delivery of groceries. Customers submit orders to the HG website by selecting the needed items from a menu. Currently, HG has employees who deliver the groceries, but the company is considering the option of contracting out deliveries. The fixed cost of the grocery delivery operation is $500,000 per year, of which, $200,000 is avoidable if grocery deliveries are contracted out. A statistical study suggests delivery costs vary with both the number of customers and the number of items purchased. On average, the fixed annual delivery cost per customer is $250 and the average variable delivery cost of each grocery item delivered is $0.50. On average, each customer purchases 1,000 grocery items per year. Therefore, if there are 2,000 customers budgeted, the number of grocery item deliveries will be 2 million. Custom delivery (CD) has offered to deliver groceries for HG as a flat rate of $850 per customer per year irrespective of the number of…arrow_forwardTim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights (365 x 50 equals the total rooms rented for the year). Tim's cost to clean a room is $13.00. The Duffy's Maid Service quote is $18.00 per room plus a fixed cost of $26,000 for sundry items such as uniforms with the motel's name. Tim's annual fixed cost for space, equipment, and supplies is $61,000. Based on the given information related to costs for each of the options, the crossover point for Tim = ☐ room nights (round your response to the nearest whole number).arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College