Demo-case-3-solution

# Demo-case-3-solution - number of such 5-unit packages to...

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Demo Cases in Chapter 3 Case 1 solution: 1. Operating profit = (P – V)X – F = (\$150 - \$90) × 1,200 - \$48,000 = \$24,000. 2. Break-even volume in units (X*) = V - P F = 90 \$ 150 \$ 000 , 48 \$ - = 800 units. Break-even volume in sales dollars (PX*) = \$150 × 800 units = \$120,000. 3. Contribution margin ratio = P V - P = \$150 \$90 \$150 - × 100% = 40%. 4. Target profit = \$57,000, Sales dollars needed (PX**) = F Target profit (P-V)/P + = % 40 000 , 57 \$ 000 , 48 \$ + = \$262,500. Units needed (X**) = PX** P = \$262,500 \$150 . 5. Assume X to be the unknown number of units sold that would produce the operating profit of 15% of sales dollars, then (P – V)X – F = 15% × PX (\$150 - \$90)X – 15% × \$150 × X = \$48,000 X = 1,280 units. Case 2 solution: 1. Out of every 5 units sold, three will be Jig Saws and two will be Circular Saws. Let X be the
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Unformatted text preview: number of such 5-unit packages to break even. Then the contribution margin from this package will be \$60 × 3 + \$80 × 2 = \$340. The break-even point (X) = \$68,000 \$340 = 200 packages. This means that a total of 600 Jig Saws (= 3 × 200 units) and 400 Circular Saws (= 2 × 200 units) have to be sold to break even. 2. Since 60 percent Jig Saws and 40 percent Circular Saws constitute the product mix, the weighted-average contribution margin per unit = .60 × \$60 + .40 × \$80 = \$68. The break-even point for both products = \$68,000 \$68 = 1,000 units. Jig Saws must be sold 600 units (= .60 × 1,000 units) and Circular Saws 400 units (= .40 × 1,000 units) to break even....
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## This note was uploaded on 10/29/2009 for the course ACC 066 taught by Professor Kwak during the Spring '08 term at DeAnza College.

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