Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 105,000 units and has fixed cost of $351,300. The variable cost per unit is $0.30. What price does Jefferson charge per unit? Note: Round to the nearest cent.$ 2. Sooner Industries charges a price of $119 and has fixed cost of $408,500. Next year, Sooner expects to sell 16,300 units and make operating income of $174,000. What is the variable cost per unit? What is the contribution margin ratio? Note: Round your variable cost per unit answer to the nearest cent. Enter the contribution margin ratio as a percentage, rounded to two decimal places. Variable cost per unit $ Contribution margin ratio % 3. Last year, Jasper Company earned operating income of $27,720 with a contribution margin ratio of 0.3. Actual revenue was $231,000. Calculate the total fixed cost. Note: Round your answer to the nearest dollar, if required.$ 4. Laramie Company has variable cost ratio of 0.35. The fixed cost is $185,900 and 26,000 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note : Do NOT round interim computations. Round answers to the nearest cent. Price $ Variable cost per unit $ Contribution margin per unit $
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.
Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense
For each of the following independent situations, calculate the amount(s) required.
Required:
1. At the break-even point, Jefferson Company sells 105,000 units and has fixed cost of $351,300. The variable cost per unit is $0.30. What price does Jefferson charge per unit? Note: Round to the nearest cent.
$
2. Sooner Industries charges a price of $119 and has fixed cost of $408,500. Next year, Sooner expects to sell 16,300 units and make operating income of $174,000. What is the variable cost per unit? What is the contribution margin ratio? Note: Round your variable cost per unit answer to the nearest cent. Enter the contribution margin ratio as a percentage, rounded to two decimal places.
| Variable cost per unit | $ | |
| Contribution margin ratio | % |
3. Last year, Jasper Company earned operating income of $27,720 with a contribution margin ratio of 0.3. Actual revenue was $231,000. Calculate the total fixed cost. Note: Round your answer to the nearest dollar, if required.
$
4. Laramie Company has variable cost ratio of 0.35. The fixed cost is $185,900 and 26,000 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note : Do NOT round interim computations. Round answers to the nearest cent.
| Price | $ |
| Variable cost per unit | $ |
| Contribution margin per unit | $ |
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