A. What is the company's break-even point in units? Break-even units_____ units B. What is the company's break-even point in dollars? Break even dollars _____ C. Construct a contribution margin income statement for the month of September when they will sell 800 units. Use a minus sign for a net loss if present. Income Statement
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Maple Enterprises sells a single product with a selling price of $70 and variable costs per unit of $21. The company's monthly fixed expenses are $29,400.
A. What is the company's break-even point in units?
Break-even units_____ units
B. What is the company's break-even point in dollars?
Break even dollars _____
C. Construct a contribution margin income statement for the month of September when they will sell 800 units. Use a minus sign for a net loss if present.
Income Statement
D. How many units will Maple need to sell in order to reach a target profit of $44,100?
New break-even units _____ units
E. What dollar sales will Maple need in order to reach a target profit of $44,100?
New break-even dollars $_____
F. Construct a contribution margin income statement for Maple that reflects $140,000 in sales volume.
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