Homework Problems:
3-22,
3-26,
3-36,
3-44,
5-43
Optional: 3-33, 3-38, 3-45, 5-46
3-22. (30 min.) CVP analysis—Planning and Decision making: T-Tunes
a.
Profit = ($180 – $100)
⋅
7,000 – $200,000
= $360,000
.
b.
10% price decrease. Now P = $162
Profit = ($162 – $100) x 7,000 – $200,000
= $234,000. Profit decreases by $126,000
20% price increase. Now P = $216
Profit = ($216 – $100) x 7,000 – $200,000
= $612,000
Profit increases by $252,000
c.
10% variable cost decrease. Now V = $90
Profit = ($180 – $90) x 7,000 – $200,000
= $430,000. Profit increases by $70,000
20% variable cost increase. Now V = $120
Profit = ($180 – $120) x 7,000 – $200,000
= $220,000. Profit decreases by $140,000
d.
Profit = ($180 – $110) x 7,000 – $180,000
= $310,000. Profit decreases by $50,000
3-26. (30 min.) Analysis of Cost Structure: Foxx Comapny vs. Beyonce, Inc.
a.
Foxx Company
Beyonce, Inc.
Amount
Percentage
Amount
Percentage
Sales .
.................................
$. 600,000
100%
$600,000
100%
Variable cost.
......................
450,000
75
120,000
20
Contribution margin .
..........
$. 150,000
25%
$ 480,000
80%
Fixed costs .
.......................
100,000
17
400,000
67
Operating profit.
.................
$.
50,000
8%
$ 80,000
13%
b. Foxx Company’s profits increase by $30,000 [= .25 x ($600,000 x .20)] and Beyonce
Inc’s profits increase by $96,000 [= .80 x ($600,000 x .20)].