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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.
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What are the CVP assumptions?
No Slip Co. produces sports socks. The company has fixed costs of\(91,080 and variable costs of \)0.81 per package. Each package sells for $1.80.
Requirements
1. Compute the contribution margin per package and the contribution marginratio. (Round your answers to two decimal places.)
2. Find the breakeven point in units and in dollars using the contributionmargin approach.
Calculating contribution margin
Glenn Company sells a product for \(80 per unit. Variable costs are \)60 per unit, and fixed costs are $800 per month. The company expects to sell 560 units in September. Calculate the contribution margin per unit, in total, and as a ratio.
What is the 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.
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