### Comprehensive CVP Analysis**Overview:**Marcus Allen is considering a business venture to sell premium car wax at vintage car shows. The wax is packaged in 64-ounce tubs. Marcus can procure the premium wax at a wholesale price of $29 per tub and intends to sell it at $84 per tub. The estimated fixed expenses, including travel costs, booth rental, and lodging, amount to $880 per car show.**Requirements:**1. **Break-even Analysis:** - Calculate the number of tubs Marcus must sell at each show to reach the break-even point.2. **Target Profit Analysis:** - **Objective:** Achieve a profit of $1,320 per show. - a. Determine the sales volume in units required to achieve the desired profit. - b. Calculate the sales volume in dollars needed to earn the desired profit. - c. Utilize the contribution margin format to create an income statement (condensed version) verifying your calculations for parts a and b.3. **Margin of Safety:** - Compute the margin of safety between the sales at break-even and the sales needed to reach the desired profit. Calculate the margin of safety in sales dollars, units, and as a percentage.

Break Even point is that Point of Sale where the Company will make no Profit and No loss. If the Sales is Above the Break even point which means company is making profit and if its below then its a Loss Break Even Point in units= Fixed Cost/Contribution Margin Per unit MContribution Margin per unit =84 - 29 =55 Contribution Margin ratio = 55/84 =65.48% 1)Break Even point = 880/55 =16 tubs 2. a) Units to Earn Desired Profit of 1,320 = (880+ 1,320)/55 =40 Tubs b.) Sales Dollar to Earn Desired Profit of 1,320 =(880+ 1,320)/65.48% =3,360 c) Sales (40 x84) 3,360 Variable cost (29 x 40) 1,160 Contribution Margin 2,200 Fixed cost 880 Net Income 1,320 3)Margin of Safety in units = 40 - 16 =24 Margin of Safety in Percentage = 24/40 =60% Margin of Safety in Dollars = 3,360 - (16 x 84) =984 Margin of Safety in Percentage = 984/3,360 =29.29%

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1. Determine the number of tubs Marcus must sell per show to break even. 2. Assume Marcus wants to earn a profit of $1,320 per show. a. Determine the sales volume in units necessary to earn the desired profit. b. Determine the sales volume in dollars necessary to earn the desired profit. c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b. 3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage

1. Determine the number of tubs Marcus must sell per show to break even. 2. Assume Marcus wants to earn a profit of $1,320 per show. a. Determine the sales volume in units necessary to earn the desired profit. b. Determine the sales volume in dollars necessary to earn the desired profit. c. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b. 3. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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