Вы находитесь на странице: 1из 38

1.

CHAPTER 3 problem solutions


2. COSTVOLUMEPROFIT ANALYSIS
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

NOTATION USED IN CHAPTER 3 SOLUTIONS


SP:
VCU:
CMU:
FC:
TOI:

Selling price
Variable cost per unit
Contribution margin per unit
Fixed costs
Target operating income

3-33

(1520 min.) CVP analysis, service firm.

1.

Revenue per package


Variable cost per package
Contribution margin per package

$7,500
6,300
$1,200

Breakeven (packages) = Fixed costs Contribution margin per package


$570,000
$1,200 per package
19. =
= 475 tour packages

18.

20.
$1, 200
$7,500

Contributi on margin per package


Selling price
21.

2.

22.

Contribution margin ratio =

=
24.

26.
3.

Number of tour packages to


earn
$102,000 operating income

$570,000 $102,000
0.16

Revenues to earn $102,000 OI = 560 tour packages $7,500 = $4,200,000.

Fixed costs = $570,000 + $19,000 = $589,000

Breakeven (packages) =
Fixed costs
Breakeven (packages)

30.

= $4,200,000, or

25.
$570,000 $102,000

560 tour packages


$1,200

Fixed costs
Contribution margin per package
29.

= 16%

Revenue to achieve target income = (Fixed costs + target OI) Contribution margin ratio

23.

27.
28.

Contribution margin per package =

$589,000
475 tour packages

31. =
32.

= $1,240 per tour package

Desired variable cost per tour package = $7,500 $1,240 = $6,260

33. Because the current variable cost per unit is $6,300, the unit variable cost will need to be
reduced by $40 ($6,300 $6,260) to achieve the breakeven point calculated in requirement 1.
34. Alternate Method: If fixed cost increases by $19,000, then total variable costs must be
reduced by $19,000 to keep the breakeven point of 475 tour packages.
35.
1.
36.
37.
38.

Therefore, the variable cost per unit reduction = $19,000 475 = $40 per tour package.
Contribution margin per package = $8,200 $6,300 = $1,900
Breakeven (packages) = Fixed costs Contribution margin per package
= $570,000 $1,900 per tour package = 300 tour packages

39. Breakeven point in dollars = $8,200 per package 300 tour packages = $2,460,000
40. The key question for the general manager is: Can Lifetime Escapes sell enough packages at
$8,200 per package to earn more total operating income than when selling packages at $7,500.
Lowering the breakeven point per se is not the objective.
41.
3.34
(30 min.) CVP, target operating income, service firm.
42.
43. 1.
Revenue per child
$400
44.
Variable costs per child
150
45.
Contribution margin per child
$250
46.
Fixed costs
Contributi on margin per child
47.
Breakeven quantity =
48.
$4,000
$250
49.
=
= 16 children
50.
Fixed costs Target operating income
Contributi on margin per child
51. 2.
Target quantity =
52.

$4,000 $5,000
$250
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.

65.
66.
67.
68.

=
3.

= 36 children

Increase in rent ($2,200 $1,500)


Field trips
Total increase in fixed costs
Divide by the number of children enrolled
Increase in fee per child

$ 700
1,100
$1,800
36
$ 50

Therefore, the fee per child will increase from $400 to $450.
Alternatively,

New contribution margin per child =

$4,000 $1,800 $5, 000


36

= $300

New fee per child = Variable costs per child + New contribution margin per child
= $150 + $300 = $450

69.

3-35

CVP analysis, margin of safety.

1.

70.
71.
72.

Selling price
Variable costs per unit:
Contribution margin per unit (CMU)
73.

$206
24
$182
Fixed costs
Contribution margin per unit

74.
75.

Breakeven point in units =

$327,600
$182
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.

Breakeven point in units =


= 1,800 returns (units)
Margin of safety (units) = 3,000* 1,800 = 1,200 units
*$618,000 budgeted revenue$206 = 3,000 units
Breakeven revenues = $206 1,800 = $370,800
Margin of safety percentage = ($618,000$370,800) $618,000= 40%

2a. Increase selling price to $224


Selling price
Variable costs per unit:
Contribution margin per unit (CMU)
87.

$224
24
$200
Fixed costs
Contribution margin per unit

88.
89.

Breakeven point in units =

$327,600
$200
90.
91.

Breakeven point in units =


= 1,638 returns (units)
Breakeven revenues
= $224 1,638 units = $366,912

92.
Margin of safety percentage = ($618,000 $366,912) $618,000 =
40.62%
93.
This change will not help Arvin achieve its desired margin of safety of
45%.
94.
95. 2b.
96.
97. Selling price
$206
98. Variable costs per unit:
24
99. Contribution margin per unit (CMU)
$182
100.

Fixed costs
Contribution margin per unit
101.
102.

Breakeven point in units =

$327,600
$182
103.
Breakeven point in units =
= 1,800 returns (units)
104.
105.
Breakeven revenues = $206 1,800 = $370,800
106.
107.
Budgeted revenues = $618,000 1.15 = $710,700
108.
Margin of safety percentage = ($710,700 $370,800) $710,700 =
47.8%
109.
This change will help Arvin achieve its desired margin of safety of 45%.
110.
111. 2c.
112. Selling price
$206
113. Variable costs per unit $24 $2):
22
114. Contribution margin per unit (CMU)
$184
115.
116. Fixed costs = $327,600 1.05 = $343,980
117.
Fixed costs
Contribution margin per unit
118.
Breakeven point in units =
119.
$343,980
$184
120.
Breakeven point in units =
= 1,870 returns/units
(rounded up)
121.
122.
Breakeven revenues = $206 1,870 units = $385,220
123.
Margin of safety percentage = ($618,000 $385,220) $618,000=
37.7%
124.
This change will not help Arvin achieve its desired margin of safety of
45%.
125.
126. Options 2a and 2b improve the margin of safety, but only option 2b exceeds the companys
desired margin of safety. Option 2c actually lowers the companys margin of safety.
127.

3-36

1.

(3040 min.) CVP analysis, income taxes.

Revenues Variable costs Fixed costs =


Let X = Net income for 2014

Target net income


1 Tax rate
X

22,000($35.00) 22,000($18.50) $214,500 =

1 0.40

X
0.60
$770,000 $407,000 $214,500 =
$462,000 $244,200 $128,700 = X
X = $89,100

Alternatively,
Operating income = Revenues Variable costs Fixed costs
= $770,000 $407,000 $214,500 = $148,500

Income taxes = 0.40 $148,500 = $59,400


Net income = Operating income Income taxes
= $148,500 $59,400 = $89,100
2.

Let Q = Number of units to break even


$35.00Q $18.50Q $214,500 = 0
Q = $214,500 $16.50 = 13,000 units

3.

Let X = Net income for 2015


X

25,000($35.00) 25,000($18.50) ($214,500 + $16,500)

1 0.40
X
0.60

$875,000 $462,500 $231,000

=
X

$181,500

4.

Let Q = Number of units to break even with new fixed costs of $146,250
$35.00Q $18.50Q $231,000
Q = $231,000 $16.50
Breakeven revenues = 14,000 $35.00

5.

0.60
=
X = $108,900

= 0
= 14,000 units
= $490,000

Let S = Required sales units to equal 2011 net income


$89,100
0.60
$35.00S $18.50S $231,000 =
$16.50S = $379,500
S = 23,000 units
Revenues = 23,000 units $35 = $805,000

6.

Let A = Amount spent for advertising in 2012


$108,450
0.60

$875,000 $462,500 ($214,500 + A) =


$875,000 $462,500 $214,500 A = $180,750
$875,000 $857,750 = A
A = $17,250

3-37 (25 min.) CVP, sensitivity analysis.


128.
129. Contribution margin per pair of shoes = $70 $30 = $40
130. Fixed costs = $100,000
131. Units sold = Total sales Selling price = $350,000 $70 per pair = 5,000 pairs of shoes
132.
1. Variable costs decrease by 20%; Fixed costs increase by 15%

133.
Sales revenues 5,000 $70
$350,000

134.
Variable costs 5,000 $30
(1 0.20)
120,000
135.
Contribution margin
230,000

136.
Fixed costs $100,000 1.15
115,000
137.
Operating income $115,000
138.
2. Increase advertising (fixed costs) by $30,000; Increase sales 20%

139.
Sales revenues 5,000 1.10 $70.00
$385,000

140.
Variable costs 5,000 1.10
$30.00
165,000
141.
Contribution margin
220,000
142.
Fixed costs ($100,000 + $25,000)
125,000
143.
Operating income $ 95,000
144.
145.
3. Increase selling price by $10.00; Sales decrease 20%; Variable costs increase by $8

146.
Sales revenues 5,000 0.80 ($70 + $10)
$320,000

147.
Variable costs 5,000 0.80
($30 + $8)
152,000
148.
Contribution margin
168,000
149.
Fixed costs
100,000
150.
Operating income $ 68,000
151.
4. Double fixed costs; Increase sales by 60%

152.
Sales revenues 5,000 1.60 $70
$560,000

153.
Variable costs 5,000 1.60 $30
240,000
154.
Contribution margin
320,000

155.

Fixed costs $100,000


200,000
Operating income

156.
$120,000
157.
158. Alternative 4 yields the highest operating income. Choosing alternative 4 will
give Derby a 20% increase in operating income [($120,000 $100,000)/$100,000 = 20%], which
is less than the companys 25% targeted increase. Alternative 1also generates more operating
income for Derby, but it too does not meet Derbys target of 25% increase in operating income.
Alternatives 2 and 3 actually result in lower operating income than under Derbys current cost
structure. There is no reason, however, for Derby to think of these alternatives as being mutually
exclusive. For example, Derby can combine actions 1 and 4, automate the machining process
and decrease variable costs by 20% while increasing fixed costs by 15%. This will result in a
38% increase in operating income as follows:
159.

160.
Sales revenue 5,000 1.60 $70
$560,000

161.
Variable costs 5,000 1.60 $30 (1 0.20)
192,000
162.
Contribution margin 368,000

163.
Fixed costs $200,000 1.15
230,000
164.
Operating income $138,000
165.
166. The point of this problem is that managers always need to consider broader rather
than narrower alternatives to meet ambitious or stretch goals.
167.
168.
169. 3-38 (2030 min.)
CVP analysis, shoe stores.
170.
171. 1. CMU (SP VCU = $60 $40)
$
20.00

172.
a. Breakeven units (FC CMU = $180,000 $20 per unit)
9,000
173.
b. Breakeven revenues

174. (Breakeven units SP = 9,000 units $60 per unit)


$540,000
175.
176. 2. Pairs sold
8,000

177.
Revenues, 8,000 $60
$480,000

178.
Total cost of shoes, 8,000 $37
296,000

179.
Total sales commissions, 8,000 $3
24,000

180.

Total variable costs


320,000

181.

Contribution margin
160,000

182.

Fixed costs
180,000

183.

Operating income (loss)


$ (20,000)

184.
185. 3.
186.

Unit variable data (per pair of shoes)


Selling price
$
60.00
Cost of shoes
37.00
Sales commissions
0

187.
188.
189.

Variable cost per unit


$
37.00

190.
191.

Annual fixed costs


Rent
$ 30,000

192.

Salaries, $100,000 + $15,500


115,500

193.

Advertising
40,000
Other fixed costs
10,000
Total fixed costs
$ 195,500

194.
195.
196.
197.

CMU, $60 $37


$
23

198.
unit
199.
$60 per unit
200.

a. Breakeven units, $195,500 $23 per


8,500

b. Breakeven revenues, 8,500 units


$510,000

201. 4.

Unit variable data (per pair of shoes)

202.

Selling price
$ 60.00
Cost of shoes
37.00
Sales commissions
5.00

203.
204.
205.

Variable cost per unit


$ 42.00

206.

Total fixed costs


$180,000

207.
208.

CMU, $60 $42


$ 18.00

a. Break even units = $180,000 $18 per unit

209.
10,000
210.

b. Break even revenues = 10,000 units

$60 per unit

211.
212. 5.

$600,000
Pairs sold
12,000

213.
pair)
214.

$37 per pair)


215.

Revenues (12,000 pairs $60 per


$720,000
Total cost of shoes (12,000 pairs

Sales commissions on first 9,000 pairs (9,000 pairs

444,000
$3 per pair)

27,000
216.

Sales commissions on additional 3,000 pairs

[3,000 pairs ($3 + $2 per pair)]

217.
15,000
218.

Total variable costs


486,000
Contribution margin

219.
234,000
220.

Fixed costs
180,000

221.

Operating income
$

54,000

222.
223. Alternative approach:
224.
225. Breakeven point in units = 9,000 pairs
226. Store manager receives commission of $2 on 3,000 (12,000 9,000) pairs.

227. Contribution margin per pair beyond breakeven point of 9,000 pairs =
$18 ($60 $40 $2) per pair.

228. Operating income = 3,000 pairs $18 contribution margin per pair = $54,000.
229.

230. 3-39 (30 min.) CVP analysis, shoe stores (continuation of 3-38).
231.
1. For an expected volume of 10,000 pairs, the owner would be inclined to choose the higherfixed-salaries-only plan because income would be higher by $14,500 compared to the salaryplus-commission plan.
232.
233. . Operating income for salary plan = $23 10,000 $195,500 = $34,500
234. Operating income under commission pan = $20 10,000 $180,000 = $20,000
235.
236. But it is likely that sales volume itself is determined by the nature of the compensation
plan. The salary-plus-commission plan provides a greater motivation to the salespeople,
and it may well be that for the same amount of money paid to salespeople, the salary-pluscommission plan generates a higher volume of sales than the fixed-salary plan.
237.
238. 2.
Let TQ = Target number of units
239.
240. For the salary-only plan,
241.
$60TQ $37TQ $195,500 = $69,000
242.
$23TQ= $264,500
243.
TQ= $264,500 $23
244.
TQ = 11,500 units
245. For the salary-plus-commission plan,
246.
$60TQ $40TQ $180,000 = $69,000
247.
$20TQ= $249,000
248.
TQ= $249,000 $20.00
249.
TQ = 12,450 units
250.
251. The decision regarding the salary plan depends heavily on predictions of demand. For
instance, the salary plan offers the same operating income at 11,500 units as the
commission plan offers at 12,450 units.
252.

253. 3.
254.
255.
256.
257.
258.
259.
260.
261.

HighStep Shoe Company


Operating Income Statement, 2014

$60) + (1,500 pairs $50)

Cost of shoes, 11,000 pairs $37

Commissions = Revenues 5% = $645,000 0.05


Contribution margin
Fixed costs
Operating income

Revenues (9,500 pairs

$645,000
407,000

32,250
205,750
180,000
25,750

262. 3-40

(40 min.) Alternative cost structures, uncertainty, and sensitivity analysis.

263.

264. 1.
Contribution
margin per
page assuming current
fixed leasing agreement

265. = $0.15 $0.04 $0.05 = $0.06 per


page

266. Fixed costs = $1,200


267. Breakeven point =
Fixed costs
$1, 200

20,000 pages
Contribution margin per page $0.06 per page
268.
269. Contribution margin per
page
270. = $0.15 $0.04a $0.04 $.05 = $0.02 per
assuming $20 per 500
page
page
commission agreement
271.
272. Fixed costs = $0
Fixed costs
$0

0 pages
Contribution margin per page $0.02 per page
273. Breakeven point =
274. (i.e., Deckle makes a profit no matter how few pages it sells)
275. a$20 500 pages = $0.04 per page
276.

x
277.
2.
Let denote the number of pages Deckle must sell for it to be indifferent
between the fixed leasing agreement and commission based agreement.
x
278. To calculate we solve the following equation.
x
x
x
x
x
x
279.
$0.15 $0.04 $0.05 $1,200 = $0.15 $0.04 $0.04 $.05
x
280.
281.
282.

$0.06

$1,200 = $0.02

x
$0.04 = $1,200
x
= $1,200 $0.04 = 30,000 pages

283.

For sales between 0 to 30,000 pages, Deckle prefers the commission-based


x
x
agreement because in this range, $0.02 > $0.06 $1,200. For sales greater than
30,000 pages, Deckle prefers the fixed leasing agreement because in this range, $0.06
x
$1,200 > $.02 .

284.

285.

3. Fixed leasing agreement

286. Pages Sold


287. (1)

288. Revenue
289. (2)
307. 20,000 $.15=$

290. Variable
291. Costs
292. (3)
308. 20,000 $.09=$

314.

3,000
30,000 $.15=$

1,800
315. 30,000 $.09=$

321.

4,500
40,000 $.15=$

2,700
322. 40,000 $.09=$

328.

6,000
50,000 $.15=$

3,600
329. 50,000 $.09=$

7,500
335. 60,000 $.15=$

4,500
336. 60,000 $.09=$

306. 20,000

313. 30,000

320. 40,000

327. 40,000

334. 60,000
341. Expected value of fixed leasing
agreement

346.
347.

9,000
342.

293. Fixe
d
294. Cost
s
295. (4)
309. $1,2
00

296. Operating
297. Income
298. (Loss)
299. (5) = (2)
(3) (4)

310. $

300. Proba
bility
301. (6)

350. Revenue
351. (2)

352. Variable
353. Costs
354. (3)

311. 0.20

312. $

317. $ 600

318. 0.20

319. 120

324. $1,200

325. 0.20

326. 240

331. $1,800

332. 0.20

333. 360

338. $2,400

339. 0.20

340.

316. $1,2
00
323. $1,2
00
330. $1,2
00
337. $1,2
00

5,400
343.

344.

355. Operating
Income
356. (4) = (2)
(3)

357. Proba
bility
358. (5)

480

345. $1,200

Commission-based leasing agreement:

348. Pa
ges
Sol
d
349. (1)

302. Expecte
d
303. Operati
ng
304. Income
305. (7)=(5)
(6)

359. Expected
Operating
Income
360. (6)=(4)

(5)
361. 2
0,000
367. 3
0,000
373. 4
0,000
379. 5
0,000

362. 20,000 $.15=$

363. 20,000 $.13=

3,000
368. 30,000 $.15=$

$2,600 364. $400


369. 30,000 $.13=

365. 0.20

366. $ 80

4,500
374. 40,000 $.15=$

$3,900 370. $600


375. 40,000 $.13=

371. 0.20

372. 120

6,000
380. 50,000 $.15=$

$5,200 376. $800


381. 50,000 $.13=

377. 0.20

378. 160

7,500
386. 60,000 $.15=$

$6,500 382. $1,000


387. 60,000 $.13=

383. 0.20

384. 200

389. 0.20
393.

390. 240
394. $800

385. 6
0,000
9,000
391. Expected value of commission based agreement

$7,800 388. $1,200


392.

395.

396. Deckle should choose the fixed cost leasing agreement because the expected value is higher than under the commission-based
leasing agreement. The range of sales is high enough to make the fixed leasing agreement more attractive.
397.
398.

399. 3-41 (20-30 min.) CVP, alternative cost structures.


400.
401. 1. Variable cost per unit = $5
402.
Contribution margin per unit = Selling price Variable cost per unit
403.
= $20 $5 = $15
404.
Fixed Costs:
405.
Managers salary ($40,000 1.20 0.5) 12
$2,000 per month
406.
Rent
800 per month
407.
Hourly employee wages (2 160 hours $10)
3,200 per month
408.
Total fixed costs
$6,000 per month
409.
410.
Breakeven point = Fixed costs Contribution margin per unit
411.
= $6,000 $15 = 400 sunglasses (per month)
412.
Fixed costs + Target operating income
Contribution margin per unit
413. 2. Target number of sunglasses =
414.
$6,000 + $4,500
700 sunglasses
$15
415.
=
416.
417. 3. Contribution margin per unit = Selling price Variable cost per computer
418.
= $20 0.15 $20 $5 = $12
419. Fixed costs = Managers salary + Rent = $2,000 + $800 = $2,800
420.
Fixed costs + Target operating income
Contribution margin per unit
421. Target number of sunglasses =
$2,800 + $4,500
609 sunglasses
$12
422.
=
(rounded up)
423.
x
424. 4. Let be the number of sunglasses for which SuperShades is indifferent between
paying a monthly rental fee for the retail space and paying an 8% commission on
sales. SuperShades will be indifferent when the operating income under the two
alternatives are equal.
425.
x
x
x
x
x
426.
$20 $5 $6,000 = $20 $5 $20 (0.08) $5,200
x
x
427. $15 $6,000 = $13.40 $5,200
x
428.$1.60 = $800
x
429.
= 500 sunglasses
430.

431. For sales between 0 and 500 sunglasses, SuperShades prefers to pay the 8% commission
x
x
because in this range, $13.40 $5,200 > $15 $6,000. For sales greater than 500
x
sunglasses, the company prefers to pay the monthly fixed rent of $800 because $15
x
$6,000 > $13.40 $5,200.
432.
433.

434. 3-42
(30 min.)
CVP analysis, income taxes, sensitivity.
435.
436. 1a.To breakeven, Carlisle Engine Company must sell 1,200 units. This amount represents
the point where revenues equal total costs.
437. Let Q denote the quantity of engines sold.
438. Revenue
=
Variable costs + Fixed costs
439. $4,000Q
=
$1000Q + $4,800,000
440. $3,000Q
=
$4,800,000
441. Q
=
1,600 units
442. Breakeven can also be calculated using contribution margin per unit.
443. Contribution margin per unit = Selling price Variable cost per unit = $4,000 $1,000 =
$3,000
444. Breakeven
= Fixed Costs Contribution margin per unit
445.
= $4,800,000 $3,000
446.
= 1,600 units
447.
448. 1b.
To achieve its net income objective, Carlisle Engine Company must sell 2,100
units. This amount represents the point where revenues equal total costs plus the
corresponding operating income objective to achieve net income of $1,200,000.
449.
450.
Revenue = Variable costs + Fixed costs + [Net income (1 Tax rate)]
451.
$4,000Q = $1,000Q + $4,800,000 + [$1,200,000 (1 0.20)]
452.
$4,000Q = $1,000Q + $4,800,000 + $1,500,000
453.
Q = 2,100 units
454.
455. 2.
None of the alternatives will help Carlisle Engineering achieve its net income
objective of $1,200,000. Alternative b, where variable costs are reduced by $300 and
selling price is reduced by $400 resulting in 1,750 additional units being sold through the
end of the year, yields the highest net income of $1,180,000. Carlisles managers should
examine how to modify Alternative b to further increase net income. For example, could
variable costs be decreased by more than $300 per unit or selling prices decreased by less
than $400? Calculations for the three alternatives are shown below.
456.
457. Alternative a
458. Revenues
=
($4,000 400) + ($3,400a 2,100) = $8,740,000
459. Variable costs =
$1,000 2,500b = $2,500,000
460. Operating income
=
$8,740,000 $2,500,000 $4,800,000 = $1,440,000
461. Net income
=
$1,440,000 (1 0.20) = $1,152,000
a
462. $4,000 ($4,000 0.15) ; b400 units + 2,100 units.
463.
464.

465.
466.
467.
468.
469.
470.
471.
472.
473.
474.
475.
476.
477.
478.
479.
480.

Alternative b
Revenues
=
($4,000 400) + ($3,600a 1,750) = $7,900,000
Variable costs =
($1,000 400) + (700b 1,750) = $1,625,000
Operating income
=
$7,900,000 $1,625,000 $4,800,000 = $1,475,000
Net income
=
$1,475,000 (1 0.20) = $1,180,000
a
b
$4,000 400 ; $1,000 $300.
Alternative c
Revenues
=
($4,000 400) + ($2,800a 2,200) = $7,760,000
Variable costs =
$1,000 2,600b = $2,600,000
Operating income
=
$7,760,000 $2,600,000 $4,320,000c = 840,000
Net income
=
$840,000 (1 0.20) = $672,000
a
$4,000 ($4,000 0.30); b400 units + 2,200nits; c$4,800,000 ($4,800,000 0.10)

481. 3-43
(30 min.) Choosing between compensation plans, operating leverage.
482.
483. 1. We can recast BioPharms income statement to emphasize contribution margin, and then
use it to compute the required CVP parameters.
484.
485. BioPharm Corporation
486.

489.
492.
497.
502.
507.
512.
517.
522.
527.
532.
537.
542.

547.
548.
555.
556.

487. Income Statement for the Year Ended December 31, 2014
488.
491. Using Own Sales
490. Using Sales Agents
Force
494. $32,0
496. $32,0
00,00
00,00
Revenues
493.
0 495.
0
Variable Costs
498.
499.
500.
501.
503. $12,1
505. $12,1
60,00
60,00
Cost of goods soldvariable
0 504.
0 506.
509. 18,5
511. 16,3
508. 6,40
60,00 510. 4,16
20,00
Marketing commissions
0,000
0
0,000
0
514. 13,44
516. 15,68
Contribution margin
513.
0,000 515.
0,000
Fixed Costs
518.
519.
520.
521.
523. 3,750,
525. 3,750,
Cost of goods soldfixed
000 524.
000 526.
529.
7,4
528. 3,66
10,00 530. 5,90 531. 9,65
Marketingfixed
0,000
0
0,000
0,000
534. $
536. $
6,030,
6,030,
Operating income
533.
000 535.
000
538.
539.
540.
541.
Contribution margin
543.

percentage ($13,440,000

$32,000,000; $15,680,000
$32,000,000)
544. 42%
545.
546. 49%
550.
553.
Breakeven revenues
$17,6
$19,6

42,85
93,87
($7,410,000 0.42; $9,650,000
7
8

0.49)
549.
551.
552.
554.
Degree of operating leverage
557.

($13,440,000 $6,030,000;
558.
560.

$15,680.000 $6,030,000)
2.23
559.
2.60

561.
562. 2. The calculations indicate that at sales of $32,000,000, a percentage change in sales and
contribution margin will result in 2.23 times that percentage change in operating income if
BioPharm continues to use sales agents and 2.60 times that percentage change in operating
income if BioPharm employs its own sales staff. The higher contribution margin per dollar
of sales and higher fixed costs gives BioPharm more operating leverage, that is, greater

benefits (increases in operating income) if revenues increase but greater risks (decreases in
operating income) if revenues decrease. BioPharm also needs to consider the skill levels
and incentives under the two alternatives. Sales agents have more incentive compensation
and, hence, may be more motivated to increase sales. On the other hand, BioPharms own
sales force may be more knowledgeable and skilled in selling the companys products. That
is, the sales volume itself will be affected by who sells and by the nature of the
compensation plan.
563.

564. 3.
565. Fixed marketing costs

Variable costs of marketing = 16% of Revenues


= $5,900,000
Variable
Fixed
marketing
marketing
Variable
Fixed
costs
costs
manuf. costs manuf. costs
566. Operating income = Revenues

567. Denote the revenues required to earn $6,030,000 of operating income by R, then
568.

569. R 0.38R $3,750,000 0.16R $5,900,000 = $6,030,000


570.
R 0.38R 0.16R = $6,030,000 + $3,750,000 + $5,900,000
571.
0.46R = $15,680,000
572.
R = $15,680,000 0.46 = $34,086,957
573.
3.44(1525 min.)
Sales mix, three products.
574.
1. Sales of A, B, and C are in ratio 20,000 : 100,000 : 80,000. So for every 1 unit of A, 5
(100,000 20,000) units of B are sold, and 4 (80,000 20,000) units of C are sold.
575.
576.
Contribution margin of the bundle = 1 $3 + 5 $2 + 4 $1 = $3 + $10 + $4 =
$17
$255,000
$17
577.
Breakeven point in bundles =
= 15,000 bundles
578.
Breakeven point in units is:
579. Product 580. 15,000 bundles 1 unit per
A:
bundle
581. 15,000 units
582. Product 583. 15,000 bundles 5 units per
B:
bundle
584. 75,000 units
585. Product 586. 15,000 bundles 4 units per
587.
60,000
C:
bundle
units
588. Total number of units to breakeven
589. 150,000
units
590.
591. Alternatively,
Let Q = Number of units of A to break even
5Q = Number of units of B to break even
4Q = Number of units of C to break even
Contribution margin Fixed costs = Zero operating income
$3Q + $2(5Q) + $1(4Q) $255,000
$17Q
Q
5Q
4Q
Total
592.

= 0
= $255,000
=
15,000 ($255,000 $17) units of A
=
75,000 units of B
=
60,000 units of C
= 150,000 units

593. 2.

Contribution margin:
A: 20,000
$ 60,000
B: 100,000 $2
C: 80,000
80,000
Contribution margin
Fixed costs

594.

$3

200,000

$1

$340,000
255,000
Operating income $ 85,000

3.

Contribution margin
A: 20,000 $3
$ 60,000
B: 80,000 $2
160,000
C: 100,000 $1
100,000
Contribution margin
$320,000
Fixed costs
255,000
595.
Operating income
$ 65,000
596.
597.
Sales of A, B, and C are in ratio 20,000 : 80,000 : 100,000. So for every 1 unit of A,
4 (80,000 20,000) units of B and 5 (100,000 20,000) units of C are sold.
598.
599.
Contribution margin of the bundle = 1 $3 + 4 $2 + 5 $1 = $3 + $8 + $5 = $16
$255,000
$16
600.
Breakeven point in bundles =
= 15,938 bundles (rounded up)
601.
Breakeven point in units is:
602. Product 603. 15,938 bundles 1 unit per
A:
bundle
604. 15,938 units
605. Product 606. 15,938 bundles 4 units per
B:
bundle
607. 63,752 units
608. Product 609. 15,938 bundles 5 units per
610.
79,690
C:
bundle
units
611. Total number of units to breakeven
612. 159,380
units
613.
614.
Alternatively,
Let Q = Number of units of A to break even
4Q = Number of units of B to break even
5Q = Number of units of C to break even
Contribution margin Fixed costs = Breakeven point
$3Q + $2(4Q) + $1(5Q) $255,000
$16Q
Q
4Q
5Q
Total

= 0
= $255,000
=
15,938 ($255,000 $16) units of A (rounded up)
=
63,752 units of B
=
79,690 units of C
= 159,380 units

Breakeven point increases because the new mix contains less of the higher contribution
margin per unit, product B, and more of the lower contribution margin per unit, product C.
615.
616.

617. 3-45 (40 min.) Multi-product CVP and decision making.


618.
1. Faucet filter:
619.
Selling price
$100
620.
Variable cost per unit
35
621.
Contribution margin per unit
$ 65
622.
623.
Pitcher-cum-filter:
624.
Selling price
$120
625.
Variable cost per unit
30
626.
Contribution margin per unit $ 90
627.
628.
Each bundle contains two faucet models and three pitcher models.
629.

630.
So contribution margin of a bundle = 2 $65 + 3 $90 = $400
631.
632.
Breakeven
Fixed costs
$1, 200, 000
point in
=

3, 000 bundles
Contribution
margin
per
bundle
$400
bundles
633.
634.
635.
636.
637.
638.
639.
640.
641.
642.
643.
644.

Breakeven point in units of faucet models and pitcher models is:

Faucet models: 3,000 bundles 2 units per bundle = 6,000 units

Pitcher models: 3,000 bundles 3 units per bundle = 9,000 units


Total number of units to breakeven
15,000 units
Breakeven point in dollars for faucet models and pitcher models is:

Faucet models: 6,000 units $100 per unit =


$ 600,000

Pitcher models: 9,000 units $120 per unit =


1,080,000
Breakeven revenues
$1,680,000

Alternatively, weighted average contribution margin per unit =


Breakeven point =

$1,200,000
15, 000 units
$80

2
15,000 units = 6,000 units
5
3
Pitcher-cum-filter: 15, 000 units 9, 000 units
5
Faucet filter:

Breakeven point in dollars


645.

Faucet filter: 6,000 units $100 per unit = $600,000

(2 $65) + (3 $90)
= $80
5

646.

Pitcher-cum-filter: 9,000 units $120 per unit = $1,080,000

647.
2. Faucet filter:
648.
Selling price
$100
649.
Variable cost per unit
30
650.
Contribution margin per unit
$ 70
651.
Pitcher-cum-filter:
652.
Selling price
$120
653.
Variable cost per unit
20
654.
Contribution margin per unit $100
655.
656.
Each bundle contains two faucet models and three pitcher models.
657.

658.
So contribution margin of a bundle = 2 $70 + 3 $100 = $440
659.
660.
Breakeven
Fixed costs
$1, 200, 000 $208, 000
point in
=

3, 200 bundles
Contribution
margin
per
bundle
$440
bundles
661.
662.
663.
664.
665.
666.
667.
668.
669.
670.
671.

Breakeven point in units of faucet models and pitcher models is:

Faucet models: 3,200 bundles 2 units per bundle = 6,400 units

Pitcher models: 3,200 bundles 3 units per bundle = 9,600 units


Total number of units to breakeven
16,000 units
Breakeven point in dollars for faucet models and pitcher models is:

Faucet models: 6,400 bundles $100 per unit = $ 640,000

Pitcher models: 9,600 bundles $120 per unit =


1,152,000
Breakeven revenues
$1,792,000

Alternatively, weighted average contribution margin per unit =


Breakeven point =

$1,200,000 + $208,000
16, 000 units
$88

(2 $70) + (3 $100)
= $88
5

2
16,000 units = 6,400 units
5
3
Pitcher-cum-filter: 16, 000 units 9, 600 units
5
Faucet filter:

Breakeven point in dollars:


672.
673.
674.

Faucet filter: 6,400 units $100 per unit = $640,000

Pitcher-cum-filter: 9,600 units $120 per unit = $1,152,000

x
3. Let be the number of bundles for Crystal Clear Products to be indifferent between
the old and new production equipment.
675.
x
676.
Operating income using old equipment = $400 $1,200,000
677.
x
678.
Operating income using new equipment = $440 $1,200,000
$208,000
679.
680.
At point of indifference:
x
x
681.
$400 $1,200,000 = $440 $1,408,000
x
x
682.
$440 $400 = $1,408,000 $1,200,000
x
683.
$40 = $208,000
x
684.
= $208,000 $40 = 5,200 bundles
685.

686.

Faucet models = 5,200 bundles 2 units per bundle = 10,400 units

Pitcher models = 5,200 bundles 3 units per bundle = 15,600 units


Total number of units
26,000 units

687.
688.
689.
690.
Let x be the number of bundles,
691.
692.
When total sales are less than 26,000 units (5,200 bundles), $400x $1,200,000 >
$440x $1,408,000,
693.
so Crystal Clear Products is better off with the old
equipment.
694.
695.
When total sales are greater than 26,000 units (5,200 bundles), $440x $1,408,000 >
$400x $1,200,000,

so Crystal Clear Products is better off buying the new


equipment.
696.
697.
At total sales of 24,000 units (4,800 bundles), Crystal Clear Products
should keep the old production equipment.
698.
699.
Check

700.
$400 4,800 $1,200,000 = $720,000 is greater than $440 4,800
$1,408,000 = $704,000.
701.
702. 3-46
(2025 min.) Sales mix, two products.
703.
1.
Sales of standard and deluxe carriers are in the ratio of 187,500 : 62,500. So for every 1
unit of deluxe, 3 (187,500 62,500) units of standard are sold.
Contribution margin of the bundle = 3 $10 + 1 $20 = $30 + $20 = $50
$2, 250, 000
$50
705.
Breakeven point in bundles =
= 45,000 bundles
706.
Breakeven point in units is:
707. Standard
708. 45,000 bundles 3 units per
709. 135,000
carrier:
bundle
units
710. Deluxe
711. 45,000 bundles 1 unit per
712. 45,000
carrier:
bundle
units
713. Total number of units to breakeven
714. 180,000
units
704.

Alternatively,
Let Q = Number of units of Deluxe carrier to break even

3Q

= Number of units of Standard carrier to break even

Revenues Variable costs Fixed costs = Zero operating income


$28(3Q) + $50Q $18(3Q) $30Q $2,250,000 =
$84Q + $50Q $54Q $30Q =
$50Q =
Q =
3Q =

0
$2,250,000
$2,250,000
45,000 units of Deluxe
135,000 units of Standard

The breakeven point is 135,000 Standard units plus 45,000 Deluxe units, a total of 180,000
units.
2a.

Unit contribution margins are: Standard: $28 $18 = $10; Deluxe: $50 $30 = $20
715.
If only Standard carriers were sold, the breakeven point would be:
716.
$2,250,000 $10 = 225,000 units.

717. 2b.

If only Deluxe carriers were sold, the breakeven point would be:
$2,250,000 $20 = 112,500 units

3. Operating income = Contribution margin of Standard + Contribution margin of Deluxe - Fixed costs

= 200,000($10) + 50,000($20) $2,250,000


= $2,000,000 + $1,000,000 $2,250,000
= $750,000
Sales of standard and deluxe carriers are in the ratio of 200,000 : 50,000. So for every 1
unit of deluxe, 4 (200,000 50,000) units of standard are sold.
Contribution margin of the bundle = 4 $10 + 1 $20 = $40 + $20 = $60
$2, 250, 000
$60
719.
Breakeven point in bundles =
= 37,500 bundles
720.
Breakeven point in units is:
721. Standard
722. 37,500 bundles 4 units per
723. 150,000
carrier:
bundle
units
724. Deluxe
725. 37,500 bundles 1 unit per
726. 37,500
carrier:
bundle
units
727. Total number of units to breakeven
728. 187,500
units
718.

Alternatively,
Let Q = Number of units of Deluxe product to break even
4Q = Number of units of Standard product to break even
$28(4Q) + $50Q $18(4Q) $30Q $2,250,000
$112Q + $50Q $72Q $30Q

= 0
= $2,250,000

$60Q = $2,250,000
Q = 37,500 units of Deluxe
4Q = 150,000 units of Standard
The breakeven point is 150,000 Standard +37,500 Deluxe, a total of 187,500 units.
The major lesson of this problem is that changes in the sales mix change breakeven points
and operating incomes. In this example, the budgeted and actual total sales in number of units
were identical, but the proportion of the product having the higher contribution margin declined.
Operating income suffered, falling from $875,000 to $750,000. Moreover, the breakeven point
rose from 180,000 to 187,500 units.
729.
730.

731. 3-47
732.
733.
734.
735.
736.
737.
738.
739.
740.
741.
742.

(20 min.) Gross margin and contribution margin.

1.
Ticket sales ($24 525 attendees)
$12,600

Variable cost of dinner ($12a 525 attendees)$6,300

Variable invitations and paperwork ($1b 525)


525
Contribution margin
Fixed cost of dinner
9,000
Fixed cost of invitations and paperwork
1,975
Operating profit (loss)

743. 2.
744.

a
b

10,975
$ (5,200)

$6,300/525 attendees = $12/attendee


$525/525 attendees = $1/attendee
Ticket sales ($24

1,050 attendees)

Variable cost of dinner ($12 1,050 attendees)

Variable invitations and paperwork ($1 1,050)


Contribution margin
Fixed cost of dinner
Fixed cost of invitations and paperwork
Operating profit (loss)

$25,200
$12,600

745.
1,050
746.
747.
9,000
748.
1,975
749.
750.
751. 3-48
(30 min.)
Ethics, CVP analysis.
752.
753. 1.
Contribution margin percentage =
Revenues Variable costs
Revenues
$4, 000, 000 $2, 400, 000
$4,000,000
754.

=
$1,600,000
$4,000,000

755.
756.
Fixed costs
Contributi on margin percentage

757.
758.

6,825
5,775

=
= 40%
Breakeven revenues
=

$1,728,000
0.40

= $4,320,000

13,650
11,550
10,975
$ 575

759. 2.

If variable costs are 52% of revenues, contribution


margin percentage equals 48%
(100% 52%)

760.

Fixed costs
Contributi on margin percentage
761.

Breakeven revenues

=
$1,728,000
0.48

762.
=
= $3,600,000
763.
764. 3.
Revenues
$4,000,000
765. Variable costs (0.52 $4,000,000)
2,080,000
766. Fixed costs
1,728,000
767. Operating income
$ 192,000
768.
769. 4.
Incorrect reporting of environmental costs with the goal of continuing operations
is unethical. In assessing the situation, the specific Standards of Ethical Conduct for
Management Accountants (described in Exhibit 1-7) that the management accountant should
consider are listed below.
770.

771. Competence
772. Clear reports using relevant and reliable information should be prepared. Preparing reports
on the basis of incorrect environmental costs to make the companys performance look better
than it is violates competence standards. It is unethical for Madden not to report environmental
costs to make the plants performance look good.
773.
774. Integrity
775. The management accountant has a responsibility to avoid actual or apparent conflicts of
interest and advise all appropriate parties of any potential conflict. Madden may be tempted to
report lower environmental costs to please Buckner and Hewitt and save the jobs of his
colleagues. This action, however, violates the responsibility for integrity. The Standards of
Ethical Conduct require the management accountant to communicate favorable as well as
unfavorable information.
776.

777. Credibility
778. The management accountants Standards of Ethical Conduct require that information
should be fairly and objectively communicated and that all relevant information should be
disclosed. From a management accountants standpoint, underreporting environmental costs to
make performance look good would violate the standard of objectivity.
779.
780. Madden should indicate to Buckner that estimates of environmental costs and liabilities
should be included in the analysis. If Buckner still insists on modifying the numbers and
reporting lower environmental costs, Madden should raise the matter with one of Buckners
superiors. If after taking all these steps, there is continued pressure to understate environmental
costs, Madden should consider resigning from the company and not engage in unethical
behavior.

781.
782.

783. 3-49
784.

(35 min.)

Deciding where to produce.

785.

786. Peoria
787. Moline
790. $150.0
792. $150.
789.
0791.
00
794. 795.
796. 797.
799. $72.00800.
801. $88.00802.
805.
86.0
807. 102.
804. 14.00
0
806. 14.00
00
809.
810. 64.00
811. 812. 48.00
814. 815.
816. 817.
819. 30.00820.
821. 15.00822.
825.
49.0
827.
29.
824. 19.00
0
826. 14.50
50
830. $
832. $
829.
15.00
831.
18.50
834. 835.
836. 837.

788. Selling price


793. Variable cost per unit
798. Manufacturing
803. Marketing and distribution
808. Contribution margin per unit (CMU)
813. Fixed costs per unit
818. Manufacturing
823.

Marketing and distribution

828. Operating income per unit


833.
838. CMU of normal production (as shown
above)
843. CMU of overtime production
844. ($64 $3; $48 $8)
849.
854. 1.
859. Annual fixed costs = Fixed cost per unit
Daily production rate
capacity
860. ($49

839.

845.
850.
855.

840. $64841.

842. $48

846. 61847.
852.
857.

848. 40
853.
858.

851.
856.

Normal annual

400 units 240 days;

861. $29.50 320 units 240 days)

862. $4,704,0
00863.

866. Breakeven volume = FC CMU of normal

production ($4,704,000 $64; $2,265,600


867.
7
48)
3,500 868. units
871.
872.
873.
876. 2.
877.
878.
881. Units produced and sold
882. 96,000883.
886. Normal annual volume (units)
888.
96,0
887. (400 240; 320 240)
00889.
892. Units over normal volume (needing
893.
overtime)
0894.
897. CM from normal production units (normal

annual volume CMU normal production) 899. $6,144,0


898. (96,000 $64; 76,800 48)
00900.
903. CM from overtime production units
905.

904. (0; 19,200 $40)


0906.
910. 6,144,00
909. Total contribution margin
0911.
914. Total fixed costs
915. 4,704,0916.

864. $2,265,600865.

869.

47,
200 870. units
874.
875.
879.
880.
884. 96,000885.
890.

76,800891.

895.

19,200896.

901. $3,686,400902.
907.

768,000908.

912. 4,454,400913.
917. 2,265,600918.

919. Operating income


924. Total operating income

00
920. $1,440,0
00921.
922. $2,188,800923.
926. $3,628,
925.
800927.
928.

929.
930. 3.
The optimal production plan is to produce 120,000
units at the Peoria plant and 72,000 units at the Moline plant. The full capacity of the
Peoria plant, 120,000 units (400 units 300 days), should be used because the contribution
from these units is higher at all levels of production than is the contribution from units
produced at the Moline plant.
931.

932. Contribution margin per plant:


933.
Peoria, 96,000 $64
$ 6,144,000
934.
Peoria 24,000 ($64
$3)
1,464,000
935.
Moline, 72,000 $48
3,456,000
936.
Total contribution margin
11,064,000
937.
Deduct total fixed costs
6,969,600
938.
Operating income
$ 4,094,400
939.
940. The contribution margin is higher when 120,000 units are produced at the Peoria plant and
72,000 units at the Moline plant. As a result, operating income will also be higher in this case
because total fixed costs for the division remain unchanged regardless of the quantity produced
at each plant.
941.
942.

Вам также может понравиться