assignment - BMAC5203 - Nguyen Phuoc Lam Vien - ASSIGNMENT BMAC5203 TASK 1 CVP Analysis 1 The Income statements Sales(40,000 units Variable expenses

assignment - BMAC5203 - Nguyen Phuoc Lam Vien - ASSIGNMENT...

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ASSIGNMENT- BMAC5203 TASK 1: CVP Analysis 1. The Income statements: Present Amount Per/uni t % Sales (40,000 units) . . . . . . . . . . . . . . $800,00 0 $20 100 % Variable expenses . . . . . . . . . . . . . . 560,000 14 70% Contribution margin . . . . . . . . . . . . . 240,000 $6 30% Fixed expenses . . . . . . . . . . . . . . . . . 192,000 Net operating income . . . . . . . . . . . . $48,000 Explain: sales per unit: $800,000/40,000 = $20 Variable expenses per unit: 560,000/40,000=$14 Proposed with new equipment Amount Per/uni t % Sales (40,000 units) . . . . . . . . . . . . . . $800,00 0 $20 100 % Variable expenses(*) . . . . . . . . . . . . . 320,000 8 40% Contribution margin . . . . . . . . . . . . . 480,000 $12 60% Fixed expenses . . . . . . . . . . . . . . . . . 432,000 Net operating income . . . . . . . . . . . . $48,000 Explain: Variable expenses would be reduced by $6 per unit, So variable expense per unit $14 - $6 = $8 And amount Variable expenses will be: $8 x 40,000 = $320,000 2.(a) Degree of operating leverage: Present: NGUYEN PHUOC LAM VIEN P a g e | 1
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ASSIGNMENT- BMAC5203 Proposed with new equipment: ( b) the break-even point in dollars Present: Proposed with new equipment: ( c) the margin of safety Present: Margin of safety = actual sales – Break even sales = 800,000 – 640,000 = $160,000 Proposed with new equipment: Margin of safety = actual sales – Break even sales = 800,000 – 720,000 = $80,000 3. The paramount factor can be how the sales vs with the economic. Because the new equipment will make CM ratio increase if the the economic good, company can be offer better price to increase sales. But it’s will be worst if economic bad, will make sales reduce, the fix cost will effect very much in the profit (new equipmet increase fix cost). Thus, management must decide whether the potential for greater profits in good years is worth the risk of deeper losses in bad years. NGUYEN PHUOC LAM VIEN P a g e | 2
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ASSIGNMENT- BMAC5203 4. Proposed salespersons be paid fixed salaries and that the company invest heavily in advertising - New level of sales: $800,000 x 1.5 = $ 1,200,000 - New level of Net operating Income: $48,000 x 1.25 = $60,000 - New variable expenses: Net operating income = (Sales – Variable expeses) – fix expenses  Variable expense = Sales – fix expenses – Net operating income =$1,200,000 – $240,000 – $60,000 = $900,000 New income statement Amount Per/uni t % Sales (60,000 units) . . . . . . . . . . . .
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