Chapter 12, Problem 12.13E

To determine

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 Ratio:

Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin ratio is calculated with the help of following formulas:

  $\text{Contribution Margin }\left(\text{Ratio}\right)\text{ = }\frac{\text{(Sales price per unit -Variable Cost per unit)}}{\text{Sales price per unit}}\times 100$

Requirement-a:

To Calculate:

The Selling price for the new product

To determine

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 Ratio:

Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin ratio is calculated with the help of following formulas:

  $\text{Contribution Margin }\left(\text{Ratio}\right)\text{ = }\frac{\text{(Sales price per unit -Variable Cost per unit)}}{\text{Sales price per unit}}\times 100$

Requirement-b:

To Calculate:

The Number of units to be sold to earn the desired operating income