Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Product Flight Dynanic $ 660, e00 64 Sure Shot Total Sales Of ratio $ 340, 000 S 1,000,000 79% Fixed expenses total $581000 per month. Required: 1 Prepare a contribution format income statement for the company as a whole 2. What is the company's break even point in dollar sales based on the current sales mix? 3. If sales increase by $52,000 a month, by how much would you expect the monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 If sales increase by $52,000 a month, by how much would you expect the monthly net operating income to increase? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net operating income increases by (Required2
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.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
