12th Edition

ISBN: 9780134486444

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Textbook Question

Chapter 21, Problem P21.56APGA

Analyzing CVP relationships

Learning Objectives 2,3,4 2.60.00%

Crandall Company sells flags with team logos. Crandall has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.

Requirements

1. Use the equation approach to compute the number of flags Crandall must sell each year to break even.
2. Use the contribution margin ratio approach to compute the dollar sales Crandall needs to earn $33,000 in operating income for 2018. (Round the contribution margin ratio to two decimal places.)
3. Prepare Crandall’s contribution margin income statement for the year ended December 31,2018, for sales of 70,000 flags. (Round your final answers up to the next whole number.)
4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should Crandall undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.)

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Chapter 21, Problem P21.55APGA

Chapter 21, Problem P21.57APGA

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Learning Tasks A. Discussion Questions: 1. Explain why a contribution margin per unit becomes profit per unit above the breakeven point. 2. Suppose a firm with a contribution margin percentage of 30% increased its advertising expenses by P10,000 and found that sales increased by P 30,000. Was it a good decision to increase advertising expenses? Suppose that the contribution margin ratio is now 40%. Would it be a good decision to increase advertising expense? B. Fill in the blanks for each of the following independent cases. Case Revenues Variable Cost Fixed Cost Total Costs Operating Contribution Income Margin Percentage A P500 P- P800 P1,200 2,000 1,000 В 300 200 C 700 1,000 ---- ---- 1,500 300 40% Assessment Task

S20-6 Calculating breakeven point in units, contribution margin given Learning Objective 3 Mackler, Inc. sells a product with a contribution margin of $50 per unit. Fixed costs are $8,000 per month. How many units must Mackler sell to break even?

S20-5 Preparing a contribution margin income statement Learning Objective 2 Gabelman Company sells a product for $95 per unit. Variable costs are $40 per unit, and fixed costs are $2,200 per month. The company expects to sell 570 units in September. Prepare an income statement for September using the contribution margin format.

Chapter 21 Solutions

Horngren's Accounting (12th Edition)

Ch. 21 - For Frank’s Funky Sounds, straight-line...Ch. 21 - Prob. 2QC Ch. 21 - Prob. 3QC Ch. 21 - Prob. 4QC Ch. 21 - Prob. 5QC Ch. 21 - On a CVP graph, the total cost line intersects the...Ch. 21 - If a company increases its sales price per unit...Ch. 21 - Prob. 8QC Ch. 21 - Prob. 9QC Ch. 21 - Prob. 10QC

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