Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost. Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price. CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period. Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss. 1. To calculate: (a) Estimated Break-even point in terms of sales units (b) Estimated Break-even point in terms of sales dollars

Question

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Answer 1

Question

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

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INVOLVE was incorporated as a not-for-profit organization on January 1, 2023. During the fiscal year ended December 31, 2023, the following transactions occurred. 1. A business donated rent-free office space to the organization that would normally rent for $35,600 a year. 2. A fund drive raised $188,000 in cash and $106,000 in pledges that will be paid next year. A state government grant of $156,000 was received for program operating costs related to public health education. 3. Salaries and fringe benefits paid during the year amounted to $209,160. At year-end, an additional $16,600 of salaries and fringe benefits were accrued. 4. A donor pledged $106,000 for construction of a new building, payable over five fiscal years, commencing in 2025. The discounted value of the pledge is expected to be $94,860. 5. Office equipment was purchased for $12,600. The useful life of the equipment is estimated to be five years. Office furniture with a fair value of $10,200 was donated by a local office…

Fairfield Company's payroll costs for the most recent month are summarized here: Item Hourly labor unges Description 920 hours $27 per hour 190 hours for Job 101 340 hours for Job 102 Factory supervision Production engineer Factory Janitorial work Selling, general, and administrative salaries Total payroll costs Required: 390 hours for Job 103 Total Cost $ 5,130 9,180 10,530 $ 24,840 4,350 7,100 1,200 8,800 $ 46,298 1. & 2. Prepare the journal entries for payroll and to apply manufacturing overhead to production. The company applies manufacturing overhead to products at a predetermined rate of $54 per direct labor hour Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list Journal entry worksheet A B Record Fairfield Company's payroll costs to be paid at a later date. Note Enter debits before credits. S.No Date 1 Account Title Debit Credit

Answer 2

Question

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

Answer 6

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

Answer 7

Chapter 21, Problem 3APSA

To determine

Introduction:

Break-even point in terms of sales units: The break-even point in sales units is the company’s fixed costs divided by the contribution margin of the company. Here, the contribution margin of the company is the selling price less the variable cost.

Break-even point in terms of sales dollars: The break-even point in sales dollars is the company’s fixed costs divided by the contribution margin ratio of the company. Here, the contribution margin of the company is the selling price less the variable cost. And the contribution margin ratio of the company is the contribution margin divided by the selling price.

CVP Chart: CVP chart is the short form of a cost volume profit chart. It shows the relationship between the units produced in a particular period, total cost involved and the sales revenues in that period.

Contribution margin income statement: It is a statement where variable costs are deducted from the sales dollars to get the contribution margin and then all fixed costs are deducted from the contribution margin to get the net profit/loss.

1.

To calculate:

(a) Estimated Break-even point in terms of sales units

(b) Estimated Break-even point in terms of sales dollars

Answer 8

Expert Solution

Answer to Problem 3APSA

Solution:

(a) Estimated Break-even point in terms of sales units is 4,500.

(b) Estimated Break-even point in terms of sales dollars is $900,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Calculation:

$\begin{matrix} (a) B r e a k - e v e n p o int in t e r m s o f s a l e s u n i t s = \frac{F i x e d \cos t s}{S e l l i n g p r i c e - V a r i a b l e \cos t} \\ = \frac{$ 270, 000}{$ 200 - $ 140} \\ = 4, 500 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales unit.

$\begin{matrix} (b) C o n t r i b u t i o n m \arg i n r a t i o = \frac{S e l l i n g p r i c e - V a r i a b l e \cos t}{s e l l i n g p r i c e} \\ = \frac{$ 200 - $ 140}{$ 200} \\ = 0.30 \\ B r e a k - e v e n p o int in t e r m s o f s a l e s d o l l a r s = \frac{F i x e d \cos t s}{C o n t r i b u t i o n m \arg i n r a t i o} \\ = \frac{$ 270, 000}{0.30} \\ = $ 900, 000 \end{matrix}$

Here, the given variable cost is the forecasted one, so the calculated value is for the estimated break-even point in terms of sales dollars.

Answer 13

To determine

2.

To Prepare:

A CVP chart

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

Answer 14

To determine

2.

To Prepare:

A CVP chart

Answer 15

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 1

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Explanations:

Given:

Maximum number of sales = 7,000

Maximum sales revenue = $1,400,000

Fixed costs= $270,000

Forecasted variable cost= $140 per 100 yards

A CVP graph has graph lines for fixed cost, total cost and sales revenue. Here, fixed cost and maximum sales are known. Now total cost at maximum number of sales has to be calculated.

Calculation:

The formula for total cost is given below.

$T o t a l \cos t = F i x e d \cos t + V a r i a b l e \cos t \times S a l e s u n i t s$

$\begin{matrix} T o t a l \cos t a t \max i m u m u n i t s o f s a l e s = F i x e d \cos t + V a r i a b l e \cos t \times M a x i m u m S a l e s u n i t s \\ = $ 270, 000 + $ 140 \times 7, 000 \\ = $ 1, 250, 000 \end{matrix}$

Based on these information, a table showing fixed cost, total cost and sales revenue at different label of sales can be constructed as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 2

In the above table, Total costs at different units of sales are calculated using the above given formula and sales in dollars are the sales units times the selling price.

By selecting this table in excel sheet, the required CVP chart is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 3

Answer 20

To determine

3.

To Show:

Contribution margin income statement at break-even point

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$

Based on these calculations, a contribution margin income statement is prepared as shown below.

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 5

Conclusion

At break-even point, net profit must be zero as shown by the above contribution margin income statement.

Answer 21

To determine

3.

To Show:

Contribution margin income statement at break-even point

Answer 22

Expert Solution

Answer to Problem 3APSA

Solution:

Loose Leaf for Fundamental Accounting Principles, Chapter 21, Problem 3APSA , additional homework tip 4

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Explanations:

Given:

Fixed costs= $270,000

Selling price= $200 per 100 yards

Forecasted variable cost= $140 per 100 yards

Break-even point sales units= 4,500

Calculation:

$\begin{matrix} S a l e s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times S e l l i n g p r i c e \\ = 4, 500 \times $ 200 \\ = $ 900, 000 \end{matrix}$

$\begin{matrix} T o t a l var i a b l e \cos t s a t b r e a k - e v e n p o int = b r e a k - e v e n p o int \times V a r i a b l e \cos t \\ = 4, 500 \times $ 140 \\ = $ 630, 000 \end{matrix}$