For the coming year, Belton Company estimates fixed costs of $60,000, the unit variable cost of $25, and the unit selling price of $50.
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.
5.
For the coming year, Belton Company estimates fixed costs of $60,000, the unit variable cost of $25, and the unit selling price of $50.
a. Determine the break-even point in units of sales.
fill in the blank 1 units
b. Determine the unit sales required to realize operating income of $100,000.
fill in the blank 2 units
c. Determine the probable operating income if sales total $400,000.
$fill in the blank 3
6.
For the past year, Cline Company had fixed costs of $6,552,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs except that a new wage contract will increase variable costs by $6 per unit.
a. Determine the break-even sales (in units) for the past year.
fill in the blank 1 units
b. Determine the break-even sales (in units) for the coming year.
fill in the blank 2 units
7.
Currently, Unicy Company's unit selling price is $25, the variable cost is $17, and the total fixed costs are $85,000. A proposal is being evaluated to increase the selling price to $27.
a. Compute the current break-even sales (in units).
fill in the blank 1 units
b. Compute the anticipated break-even sales (in units), assuming that the unit selling price is increased and all costs remain constant.
fill in the blank 2 units
8.
For the current year ending April 30, Philip Company expects fixed costs of $70,000, a unit variable cost of $45, and a unit selling price of $95.
a. Compute the anticipated break-even sales (in units).
fill in the blank 1 units
b. Compute the sales (in units) required to realize an operating profit of $8,000.
fill in the blank 2 units
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