SolutionstoHW2

SolutionstoHW2 - Homework Problems: 3-22, 3-26, 3-36, 3-44,...

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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)].
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3-36. (35 min.) CVP Analysis with Semifixed Costs: Cesar’s Bottlers. a. There are three possible break-even points (one with each additional shift): 1 shift: X = $1,980 ÷ ($2.00 – $0.90) = 1,800 cases 2 shifts: X = $3,740 ÷ ($2.00 – $0.90) = 3,400 cases 3 shifts: X = $5,170 ÷ ($2.00 – $0.90) = 4,700 cases Each of the three break-even points is feasible. b. To answer this question, we just need to check at the three maximum levels for each lane alternative: Alternative Profit 1 shift [($2.00 - $0.90) x 2,000 cases – $1,980] = $220 2 shifts [($2.00 - $0.90) x 3,600 cases – $3,740] = $220 3 shifts [($2.00 - $0.90) x 5,000 cases – $5,170] = $330 Cesar should operate 3 shifts.
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SolutionstoHW2 - Homework Problems: 3-22, 3-26, 3-36, 3-44,...

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