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Cost Volume Profit Analysis and Decisions: Manufacturer - Management Assignment Help
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Assignment Task:
Task:
18.2 (a) The break-even point in sales units is calculated using the following formula:
= 
(b) The break-even point is calculated in sales dollars using the following formula:
= 
(c) In the graphical approach, sales revenue and total costs are graphed. The break-even point occurs at the intersection of the total revenue and total cost lines.
EXERCISE 18.25 (25 minutes) Cost volume profit analysis and decisions: manufacturer
1 Break-even point (in units) = 
= 
= 4000 TVs
2 New break-even point (in units) = 
= 
= 4400 TVs
3 Sales revenue (5000 ´ 3000) = $15 000 000
|
Variable costs (5000 ´ 2000) |
10 000 000 |
|
Contribution margin |
5 000 000 |
|
Fixed costs |
4 000 000 |
|
Net profit |
$1 000 000 |
4 New break-even point (in units) = 
= 8000 TVs
5 Analysis of price change decision:
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|
Price |
|||
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$3 000 |
$2 500 |
||
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Sales revenue: |
(5000 ´ 3000) |
15 000 000 |
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|
|
|
(6200 ´ 2500) |
|
15 500 000 |
|
|
Variable costs: |
(5000 ´ 2000) |
10 000 000 |
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|
|
|
(6200 ´ 2000) |
________ |
12 400 000 |
|
|
Contribution margin |
|
5 000 000 |
3 100 000 |
|
|
Fixed expenses |
|
4 000 000 |
4 000 000 |
|
|
Net profit (loss) |
|
$1 000 000 |
($900 000) |
|
The price cut should not be made, since instead of $1 000 000 profit, a loss of $900 000 will incur.
Additional question
|
1 |
Bicycle type |
Sales price |
Unit |
Unit |
|
|
Road bikes |
$2000 |
$800 ($750 + $50) |
$1200 |
|
|
Mountain bikes |
1500 |
600 ($575 + $25 |
900 |
|
2 |
Sales mix: |
|
|
|
|
Road bicycles |
25% |
|
|
|
Mountain bicycles.......................................................................... |
75%
|
|
|
3 |
Weighted-average unit |
= ($1200 ´ 25%) + ($900 ´ 75%) |
|
|
|
|
= $975
|
|
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