Exercises and Problems Cvp

CVP: EXERCISES AND PROBLEMS 1. Gilley, Inc., sells a single product. The company's most recent income statement is given below. Sales (4,000 units) Less variable expenses Contribution margin Less fixed expenses Net income Required: a. b. Contribution margin per unit is If sales are doubled to $240,000, total variable costs will equal If sales are doubled to $240,000, total fixed costs will equal If 10 more units are sold, profits will increase by Compute how many units must be sold to break even. Compute how many units must be sold to achieve profits of $20,000. $ _______________ per unit $120,000 (68,000) 52,000 (40,000) $ 12,000

$ _______________

c.

$ _______________ $ _______________ # _______________

d. e. f.

# _______________

Answer: a. b. c. d. e. f. Contribution margin per unit is $30 – $17 = $13 $68,000 x 2 = $136,000 $40,000 Contribution margin of $13 x 10 units = $130 Fixed costs of $40,000 / Contribution margin per unit $13 = 3,077 units (Fixed costs of $40,000 + Profits $20,000) / CM per unit $13 = 4,616 units

1
Create PDF files without this message by purchasing novaPDF printer (http://www.novapdf.com)

2.

Blankinship, Inc., sells a single product. The company's most recent income statement is given below. Sales Less variable expenses Contribution margin Less fixed expenses Net income Required: a. b. c. d. Contribution margin ratio is Breakeven point in total sales dollars is To achieve $40,000 in net income, sales must total If sales increase by $50,000, net income will increase by __________ % $ _______________ $ _______________ $ _______________ $200,000 (120,000) 80,000 (50,000) $ 30,000

Answer: a. b. c. d. Contribution margin ratio is $80,000 / $200,000 = 40% Fixed costs $50,000 / 0.40 CM% = $125,000 in sales [Fixed costs $50,000 + Net income $40,000] / 0.40 CM% = $225,000 in sales $50,000 x 0.40 CM% = $20,000 increase in net income

3.

In 2004, Grant Company has sales of $800,000, variable costs of $200,000, and fixed costs of