Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $307,800, and the sales mix is 70% bats and 30% gloves. The unit selling price and the unit variable cost for each product are as follows: Products Unit Selling Price Unit Variable Cost Bats $80 $60 Gloves 200 120

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $307,800, and the sales mix is 70% bats and 30% gloves. The unit selling price and the unit variable cost for each product are as follows: Products Unit Selling Price Unit Variable Cost Bats $80 $60 Gloves 200 120

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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Concept explainers

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.

Question

Products	Unit Selling Price	Unit Variable Cost
Bats	$80		$60
Gloves	200		120

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