Learning Materials
Features
Discover
Chapter 20: Q20-19RQ (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.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Determining cost behavior
Identify each cost below as variable (V), fixed (F), or mixed (M), relative to units sold. Explain your reason.
Units Sold 25 50 75 100
a. Total phone cost \( 150 \) 200 \( 250 \) 300
b. Materials cost per unit 35 35 35 35
c. Manager鈥檚 salary 3,000 3,000 3,000 3,000
d. Depreciation cost per unit 60 30 20 15
e. Total utility cost 400 650 900 1,150
f. Total cost of goods sold 3,125 6,250 9,375 12,500
The contribution margin income statement of Sugar Lips Donuts for August 2018 follows:
Sugar Lips sells three dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for \(4.00, with total variable cost of \)1.80 per dozen. A dozen custard-filled donuts sells for \(8.00, with total variable cost of \)3.60 per dozen.
Requirements
1. Calculate the weighted-average contribution margin.
2. Determine Sugar Lips鈥檚 monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.
3. Compute Sugar Lips鈥檚 margin of safety in dollars for August 2018.
4. Compute the degree of operating leverage for Sugar Lips Donuts. Estimate the new operating income if total sales increase by 30%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains unchanged.)
5. Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 30% increase in total sales. (The sales mix remains unchanged.)
The budgets of four companies yield the following information:
Company
Blue Red Green Yellow
Net Sales Revenue \( 1,900,000 \) (d) \( 1,500,000 \) (j) Variable Costs (a) 47,250 1,050,000 256,200 Fixed Costs (b) 168,000 159,000 (k) Operating Income (Loss) 298,500 (e) (g) 97,800
Units Sold 190,000 9,000 (h) (l) Contribution Margin per Unit \( 3.00 \) (f) \( 75.00 \) 18.00
Contribution Margin Ratio (c) 80% (i) 30%
Requirements
1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)
2. Which company has the lowest breakeven point in sales dollars?
3. What causes the low breakeven point?
Identifying variable, fixed, and mixed costs Holly鈥檚 Day Care has been in operation for several years. Identify each cost as variable (V), fixed (F), or mixed (M), relative to number of students enrolled.
1. Building rent.
2. Toys.
3. Compensation of the office manager, who receives a salary plus a bonus based on number of students enrolled.
4. Afternoon snacks.
5. Lawn service contract at $200 per month.
6. Holly鈥檚 salary.
7. Wages of afterschool employees.
8. Drawing paper for students鈥� artwork.
9. Straight-line depreciation on furniture and playground equipment.
10. Fee paid to security company for monthly service.
Following is the income statement for Marrow Mufflers for the month of June 2018:
MARROW MUFFLERS
Contribution Margin Income Statement
Month Ended June 30, 2018
Net Sales Revenue (140 units _ \(250) \) 35,000
Variable Costs (140 units _ \(50) 7,000
Contribution Margin 28,000
Fixed Costs 11,500
Operating Income \) 16,500
Requirements
1. Calculate the degree of operating leverage. (Round to four decimal places.)
2. Use the degree of operating leverage calculated in Requirement 1 to estimate the change in operating income if total sales increase by 40% (assuming no change in sales price per unit). (Round interim calculations to four decimal places and final answer to the nearest dollar.)
3. Verify your answer in Requirement 2 by preparing a contribution margin income statement with the total sales increase of 40%.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine