COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 3, Problem 3.28E
CVP analysis, sensitivity analysis. Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has fixed
- 1. How many jeans must Perfect Fit sell in order to break even?
Required
- 2. How many jeans must the company sell in order to reach:
- a. a target operating income of $420,000?
- b. a net income of $420,000?
- 3. How many jeans would Perfect Fit have to sell to earn the net income in requirement 2b if: (Consider each requirement independently.)
- a. the contribution margin per unit increases by 10%.
- b. the selling price is increased to $51.50.
- c. the company outsources manufacturing to an overseas company increasing variable costs per unit by $2.00 and saving 70% of fixed manufacturing costs.
Expert Solution & Answer
Learn your wayIncludes step-by-step video
schedule10:29
Students have asked these similar questions
Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has fixed manufacturing costs of $2,250,000 and fixed marketing costs of $250,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%.
Q1. How many jeans must Perfect Fit sell in order to break even?
Q2. How many jeans must the company sell in order to reach:
a. a target operating income of $420,000?
b. a net income of $420,000?
Q3. How many jeans would Perfect Fit have to sell to earn the net income in requirement 2b if: (Consider each requirement independently.)
a. the contribution margin per unit increases by 10%.
b. the selling price is increased to $51.50.
c. the company outsources manufacturing to an overseas company increasing variable costs per unit by $2.00 and saving 70% of fixed manufacturing costs.
2CVP analysis, sensitivity analysis. Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers
across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The
company has fixed manufacturing costs of $2,250,000 and fixed marketing costs of $250,000. Sales commis-
sions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%
1.
How many jeans must Perfect Fit sell in order to break even?
How many jeans must the company sell in order to reach:
a target operating income of $420,000?
b. a net income of $420,000?
2.
.219
inu ni niog neveleend 0.8s-
a.
S
W
Sbas
3. How many jeans would Perfect Fit have to sell to earn the net income in requirement 2b if: (Consider
odworl2
21
each requirement independently.)
the contribution margin per unit increases by 10%
b. the selling price is increased to $51.50.
c. the company outsources manufacturing to an overseas company increasing variable costs per…
Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of 50 with 40 in variable costs of goods sold. The company has fixed manufacturing costs of 1500000 and fixed marketing costs of 300000. Sales commissions are paid to the wholesale sales reps at 5% of revenues. The company has an income tax rate of 20%. (include formulas)
How many jeans must Perfect Fit sell in order to break even?
How many jeans must the company sell in order to reach
A target operating income of$520,000?
A net income of$520,000?
How many jeans would Perfect Fit have to sell to earn the net income in requirement above if (Consider each requirement independently.)
The contribution margin per unit increases by 20%
The selling price is increased to $52.00.
The company outsources manufacturing to an overseas company, increasing variable costs per unit by $3.00 and saving 70% of fixed manufacturing costs.
Chapter 3 Solutions
COST ACCOUNTING
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Conversion costs are a. direct materials plus direct labor. b. direct labor plus manufacturing overhead. c. dir...
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
4. JC Manufacturing purchase d inventory for $ 5,300 and al so paid a $260 freight bill. JC Manufacturing retur...
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
On what three things is equivalence based?
Construction Accounting And Financial Management (4th Edition)
the relationship between the net income and the average common equity that are invested in the company. Use the...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Determining Acquisition Cost. Haply, Inc. incurred the following expenditures when acquiring a new assembly mac...
Intermediate Accounting
Small Business Analysis Purpose: To help you understand the importance of cash flows in the operation of a smal...
Financial Accounting, Student Value Edition (4th Edition)
Knowledge Booster
Similar questions
- Just for You Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $40 with $31 in variable costs of goods sold. The company has fixed manufacturing costs of $1,100,000 and fixed marketing costs of $300,000. Sales commissions are paid to the wholesale sales reps at 5% of revenues. The company has an income tax rate of 20%. Read the requirements LOADING... . Requirement 1. How many jeans must Just for You sell in order to break even? Select the formula labels, enter the amounts and calculate the breakeven number of pair of jeans. Fixed costs ÷ Contribution margin per unit = Breakeven number of units $1,400,000 ÷ $7.00 = 200,000 Requirement 2a. How many jeans must the company sell in order to reach a target operating income of $500,000? Select the formula labels, enter the amounts and calculate the number of jeans required to be sold to reach a target operating…arrow_forwardnaruarrow_forwardCVP analysis, income taxes. The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable Costs for each customer is $3.50. The income tax rate is 36%, Target net income is $117,600. Jau Compute the revenues needed to earn the target net income. How many customers are needed to break even? To earn net income of $117,600? Compute net income if the number of customers is 170,000. 1. 2. 162 3.arrow_forward
- Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by 10%. Determine if Redlands should increase its selling price. (Ignore income taxes.) g. Assume that Redlands currently sells 30 units and has a 40% income tax rate. The firm estimates that a $25 increase in fixed cost from automating the plant would lower variable costs to $2 per unit. Determine if Redlands should change its cost structure. f. Current Alternative Sales revenue Variable cost Contribution margin Fixed cost Net income g. Current Alternative Sales revenue Variable cost Contribution margin Fixed cost Pretax income Income tax expense Net incomearrow_forwardTim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: product type sales price price invoice cost sales commission high quality 1850 840 100 medium quality 920 620 40 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore income taxes.)a. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.b. How many bicycles of each type must be sold to earn a target net income of $126,750? Assume a constant sales mix.arrow_forwardClank Bicycles is a bicycle retailer that sells road bikes and mountain bikes. Mountain bikes accounts for 60% of the store’s total sales volume. The selling price and variable cost per unit are as follows: Road bike Mountain bike Selling price 4,700 3,400 Product cost 3,080 2,600 Sales commission 60 40 Annual fixed costs are $113,400. Ignore tax effects and assume a constant sales mix. Required: Calculate the break-even point in units and dollars. Calculate how many bicycles of each type needed to be sold to earn a target net profit of $340,200?Hint: Same formula as a single product, but divided by ‘weighted average unit contribution margin’ instead of ‘unit contribution margin’.arrow_forward
- Coney Adventures Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by 10%. Determine if Redlands should increase its selling price. (Ignore income taxes.) Assume that Redlands currently sells 30 units and has a 40% income tax rate. The firm estimates that a $25 increase in fixed cost from automating the plant would lower variable costs to $2 per unit. Determine if Redlands should change its cost structure.arrow_forwardTim's Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: product type high quality medium quality price invoice cost 840 620 sales commission sales price 1850 920 100 40 Three-quarters of the shop's sales are medium-quality bikes. The shop's annual fixed expenses are $270,400. (In the following requirements, ignore income taxes.) a. What is the shop's break-even sales volume in dollars? Assume a constant sales mix. b. How many bicycles of each type must be sold to earn a target net income of $126,750? Assume a constant sales mix.arrow_forwardPrblmarrow_forward
- Carla Vista Cash, Ltd. operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $18 each. All other costs incurred by the company are fixed. Carla Vista Cash, Ltd. sells the hats for $45 each. (a) If fixed costs total $472,500 per year, what is the breakeven point in units? In sales dollars? The breakeven point The breakeven sales $ hatsarrow_forwardGotcha Covered manufactures and sells leather cases for cell phones. Each case sells for $80. Variable manufacturing costs are $30 per case. We pay a sales commission of 10% of the selling price to our salespeople. Fixed manufacturing costs are $200,000 and fixed operating costs are $35,000. Calculate the following amounts: a. b. C. ii. iii. iv. V. Target quantity if we want to generate Operating Income = $100,000 Neatly draw a CVP Chart. Be sure to label everything relevant. We currently produce and sell 10,000 cases. i. What is our expected Operating Income? How much is our Margin of Safety in units and dollars? Prepare an Income Statement (through Oper Inc) using the GM format. Prepare an Income Statement (through Oper Inc) using the CM format. Our plant manager suggested we purchase a new machine which will lower our labor costs. This change will increase Fixed Costs by $30,000 and reduce Variable Cost per Unit by $5. Calculate the new Breakeven Quantity and new expected Operating…arrow_forwardLeather and Boots Inc. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Plain Fancy Unit selling price $20.00 $35.00 Variable cost per unit 12.00 24.50 Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000. REQUIREMENTS 1) Assuming that the sales mix remains constant, the total number of units that Leather and Boots must sell to break even is? 2) Assuming that the sales mix remains constant, the total number of units that Fancy must sell to break even is?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College