Ocean Company is conducting a cost-volume-profit (CVP) analysis and has just prepared the following budget information for the coming year: Product Line Alpha Beta Ceta Total $ $ $ $ Sales revenues 600,000 1,200,000 200,000 2,000,000 Less: variable costs 480,000 800,000 120,000 1,400,000 Contribution margin 120,000 400,000 80,000 600,000 Less: fixed costs 330,000 Net profit 270,000 The budget assumes the sale of 20,000 units of Alpha, 100,000 units of Beta, and 40,000 units of Ceta. Required: (a) Determine the overall contribution
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Ocean Company is conducting a cost-volume-profit (CVP) analysis and has just prepared the
following budget information for the coming year:
Product Line Alpha Beta Ceta Total
$ $ $ $
Sales revenues 600,000 1,200,000 200,000 2,000,000
Less: variable costs 480,000 800,000 120,000 1,400,000
Contribution margin 120,000 400,000 80,000 600,000
Less: fixed costs 330,000
Net profit 270,000
The budget assumes the sale of 20,000 units of Alpha, 100,000 units of Beta, and 40,000 units
of Ceta.
Required:
(a) Determine the overall contribution margin ratio the company's break-even point in total
sales dollars.
(b) Determine the company's break-even point in total units and individual product units at
the budgeted sales mix.
(c) If total sales volume is increased to 200,000 units with the same budgeted sales mix,
calculate the total amount of contribution margin and the net profit earned.
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