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Chapter 20: Q19RQ (page 1119)
On the CVP graph, where is the breakeven point shown? Why?
Answer
On the CVP graph, the breakeven point is the point where the line of sales revenue and total costs intersects.
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White Company sells flags with team logos. White has fixed costs of \(639,600 per year plus variable costs of \)4.20 per flag. Each flag sells for \(12.00.
Requirements
1. Use the equation approach to compute the number of flags White must sell each year to break even.
2. Use the contribution margin ratio approach to compute the dollar sales White needs to earn \)32,500 in operating income for 2018. (Round the contribution margin to two decimal places.)
3. Prepare White鈥檚 contribution margin income statement for the year ended December 31, 2018, for sales of 73,000 flags. (Round your final answers up to the next whole number.)
4. The company is considering an expansion that will increase fixed costs by 23% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should White undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.)
Question: Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are $170,800 per month.
S20-10 Computing contribution margin per unit, breakeven point in sales units
Compute the contribution margin per unit and the number of tickets Funday Park must sell to break even. Perform a numerical proof to show that your answer is correct.
Question: Computing contribution margin in total, per unit, and as a ratio
Complete the table below for contribution margin per unit, total contribution margin, and contribution margin ratio:
A B C Number of units 1,720 units 14,920 units 4,620 units
Sales price per unit \( 1,800 \) 4,500 $ 5,550
Variable costs per unit 720 3,600 1,665
Calculate: 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥�
Contribution margin per unit 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥�
Total contribution margin 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥� 鈥�
Contribution margin ratio
How does a contribution margin income statement differ from a traditional income statement?
Question: This problem continues the Piedmont Computer Company situation from Chapter 19. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is \(750 and the weighed-average variable cost per unit is \)450. The company does not expect the sales mix to vary for the next year. Average fixed costs per month are \(156,000.
Requirements
1. What is the number of units that must be sold each month to reach the breakeven point?
2. If the company currently sells 945 units per month, what is the margin of safety in units and dollars?
3. If Piedmont Computer Company desires to make a profit of \)15,000 per month, how many units must be sold?
4. Piedmont Computer Company thinks it can restructure some costs so that fixed costs will be reduced to \(90,000 per month, but the weighted-average variable cost per unit will increase to \)525 per unit. What is the new breakeven point in units? Does this increase or decrease the margin of safety? Why or why not?
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