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
Weighted Average Contribution Margin:
Weighted Average Contribution Margin is calculated for two products with the help of following formula:
To calculate:
The weighted Average contribution margin per unit and weighted average contribution margin ratio
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- Tim-Buck-Il rents jet skis at a beach resort. There are three models available to rent: Junior, Adult, and Expert. The rental price and variable costs for these three models are as follows: The current product mix is 5:4:1. The three models share total fixed costs of $1 14,750 A. Calculate the sales price per composite unit. B. What is the contribution margin per composite unit? C. Calculate Tim-Buck-IIs break-even point in both dollars and units. D. Using an income statement format, prove that this is the break-even point.arrow_forwardSales Mix and Break-Even Analysis Megan Company has fixed costs of $231,150. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow: Product Selling Price Variable Cost per Unit Contribution Margin per Unit QQ $180 $100 $80 ZZ 240 180 60 The sales mix for Products QQ and ZZ is 35% and 65%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number. a. Product QQ fill in the blank 1 unitsb. Product ZZ fill in the blank 2 unitsarrow_forwardHigh-Low Method; Contribution Format Income Statement Milden Company is a distributor who wants to start using a contribution format income statement for planning purposes. The company has analyzed its expenses and developed the following cost formulas: Because shipping expense is a mixed cost, the company needs to estimate the variable shipping expense per unit sold and the fixed shipping expense per quarter using the following data: Required: 1. Using the high-low method, estimate a cost formula for shipping expense in the form Y = a + bX. 2. In the first quarter of Year 3, the company plans to sell 12,000 units at a selling price of $ 100 per unit. Prepare a contribution format income statement for the quarter.arrow_forward
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