Concept Introduction:
Cost Volume Profit (CVP) Analysis:
The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.
Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:
Contribution margin = Sales - Variable cost.
Similarly contribution margin ratio = Contribution/sales
Breakeven Point:
The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no
To Indicate:
The reason for difference in breakeven points of the companies
Trending nowThis is a popular solution!
Chapter 11 Solutions
Survey of Accounting (Accounting I)
- Use the information from the previous exercises involving JJ Manufacturing to determine their break-even point in sales dollars.arrow_forwardUse the information from the previous exercises involving Salvador Manufacturing to determine their break-even point in sales dollars.arrow_forwarda) Compute the breakeven sales dollars of cach product assuming the same sales mix remains constant. b) Prepare an analysis showing whether Product Z should be eliminated. The amount of change to net income should be computed. c) Assume the current demand of cach product is same as the sales volume the company has for the year. Below is the machine processing time required for cach product. Product Machine processing time in hours i. How many units should the company produce for each product if there is a constraint of only 24.000 hours of machine processing time in the year. ii. Compute the highest possible net income camed by the company. 3 2 An accountant has prepared the folowing product-line income statement for the year: Product Tatal No of mts sokd 5,000 4,000 4,000 Saks Varible enpermes 200,000 S 120,000 100,000 S 60.000 40,000 S 20,000 60,000 40,000 20,000 Cotribution mangin 80,000 40,000 20,000 Fihed expenses Rert Depreciin 10,000 12,000 8,000 5.000 6,000 2,000 2,400 3,000…arrow_forward
- 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?arrow_forwardDuring the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ's: a) Contribution margin and gross margin will be lower. b) Contribution margin will be higher, while its gross margin will remain the same. c) Operating income will be the same under both the financial accounting income statement and contribution income statementarrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,591, 000 706, 760 884, 240 973,000 $ (88,760) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 351,000 $262,000 56% Division Central $ 660,000 36% $ 335,000 West $ 580,000 47% $206,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $25,000 will increase that division's sales by 18%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease)…arrow_forward
- Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix A 18,288 80% B 4,572 20 Total 22,860 100% Assume the following unit selling prices and unit variable costs: Product Selling Price Variable Cost Contribution Margin A $ 89 $ 74 $ 15 B 149 109 40 Fixed costs are $418,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. Determine the…arrow_forwardMultiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 30,000 ceiling fans and 60,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $50 $16 Unit variable cost $1 $4 Direct fixed cost $23,000 $42,000 Common fixed selling and administrative expenses total $78,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)? Sales mix of ceiling fans to table fans =| 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number. Break-even ceiling fans Break-even table fansarrow_forwardRJM Enterprises is a manufacturer of consumer electronics products. The industry is very competitive, and RJM has seen its profits fall in recent years, including an operating loss of $17,525 last year. RJM was able to turn that around this year by aggressively cutting costs. The summarized financial results for RJM are shown below: Gross sales: Less variable costs Direct materials Direct labor Total contribution margin Fixed costs Operating income Current Year $ 982,290 480,870 221,940 $ 279,480 33,509 $ 245,971 Prior Year $ 1,344,725 807,500 498,750 $ 38,475 56,000 $ (17,525) Jim Green, the management accountant at RJM, is analyzing the company's performance for this year in order to explain to management the specific aspects that drove the company to success. Some of the information Jim obtained follows: Sales units Current Year 41,100 $ 23.90 $ 7.80 1.50 0.60 Prior Year 47,500 $ 28.31 $ 8.50 2.00 0.75 $ 14.00 Price Direct materials cost per unit of material Direct materials…arrow_forward
- A segment of a company reports the following loss for the year. All $178,500 of its variable costs are avoidable, and $110,000 of its fixed costs are avoidable. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) $ 255,000 178,500 76,500 115,000 (38,500) (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be eliminated? Complete this question by entering your answers in the tabs below. Required A Required B Compute the income increase or decrease from eliminating this segment. Segment Elimination Analysis Income Increase (Decrease) Sales Variable costs Contribution margin Fixed costs Income (loss) Continue Eliminate $ 255,000 178,500 76,500 115,000 $ (38,500)arrow_forwardAidel Inc., a merchandising company, reported the following results for September. Cost of goods sold 205,837 Fixed selling and administrative expense 41,331 Variable selling and administrative expense, 86,269 Sales revenue 563,800 This question is independent of all other questions. Please use only the information in this question to calculate the answer. Based on the information provided above, calculate break – even in dollars. Cost of goods sold is a variable cost in this company. Enter only the amount for the break – even in dollars in the box provided below ( rounded to a whole number, based on general rounding rules). Enter the amount only. Do not enter letters, words, dollar signs or the calculation.arrow_forwardRiders Company computes net operating income under both the absorption costing approach and the variable costing approach. For a given year the absorption costing net operating income was greater than the variable costing net operating income. This fact suggests that: more units were produced during the year than were sold. more units were sold during the year than were produced. common costs were greater than variable costs for the year. variable manufacturing costs were less than fixed manufacturing costs.arrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegePrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College