Two companies Malcom and Yoda manufacture the similar hand-sanitizing products. The following data for the two companies for the year 2019 are provided below: Malcom ($) Yoda ($) Sales revenue 60,000 72000 Total costs 42,000 48000 Variable Costs 40 % of sales revenue 50% Required: If sales of the product in Yoda company are equal to 3,000 units, determine the BEP (in units), and present the Break-even chart. In 2019, company Yoda plans to increase the variable cost by $1 while the fixed cost and the selling price will remain constant. Calculate the number of units to be sold in order to earn the same profit as Malcom in 2019. Based on your answers to parts 1 and 2, Discuss which company has a safer financial position, and why. I need the answers of the the remaining subparts too all these three points
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Two companies Malcom and Yoda manufacture the similar hand-sanitizing products. The following data for the two companies for the year 2019 are provided below:
|
Malcom ($) |
Yoda ($) |
|
|
Sales revenue |
60,000 |
72000 |
|
Total costs |
42,000 |
48000 |
|
Variable Costs |
40 % of sales revenue |
50% |
Required:
- If sales of the product in Yoda company are equal to 3,000 units, determine the BEP (in units), and present the Break-even chart.
- In 2019, company Yoda plans to increase the variable cost by $1 while the fixed cost and the selling price will remain constant. Calculate the number of units to be sold in order to earn the same profit as Malcom in 2019.
- Based on your answers to parts 1 and 2, Discuss which company has a safer financial position, and why.
I need the answers of the the remaining subparts too all these three points
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
