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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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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Base on the scenerio below Mr. Snow was extremely upset with the budget deficit. He immediately called you, the treasurer, to complain about the budget variance for the meal cost. He told you that the added dessert caused the meal cost to be $4,810 ($25,110-$20,300) over budget. He added, “I could expect a couple hundred dollars one way or the other, but several thousand is totally unacceptable. At the next budget meeting of the budget committee, I want you to explain what happened.” I need help Summarizing the results of the sales volume and variable cost volume variances computations based on the comparison between the master budget and the flexible budge. Along with Summarizing the results of the flexible budget variances computations based on the comparison between the flexible budget and the actual results.Justifing the favorable or unfavorable budget variances. Since this is a not-for-profit organization, addressing why anyone should be concerned with meeting the budget. Making…

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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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.

Connect Access Card 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:

Connect Access Card 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}$