ch03sol - CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS NOTATION...

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CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 3-16 (10 min.) CVP computations. Variable Fixed Total Operating Contribution Contribution Revenues Costs Costs Costs Income Margin Margin % a. $2,000 $ 500 $ 300 $ 800 $1,200 $1,500 75.0% b. 2,000 1,500 300 1,800 200 500 25.0% c. 1,000 700 300 1,000 0 300 30.0% d. 1,500 900 300 1,200 300 600 40.0% 3-20 (20 min.) CVP exercises. 1a. [Units sold (Selling price – Variable costs)] – Fixed costs = Operating income [5,000,000 ($0.50 – $0.30)] – $900,000 = $100,000 1b. Fixed costs ÷ Contribution margin per unit = Breakeven units $900,000 ÷ [($0.50 – $0.30)] = 4,500,000 units Breakeven units × Selling price = Breakeven revenues 4,500,000 units × $0.50 per unit = $2,250,000 or, Contribution margin ratio = price Selling costs Variable price Selling - = $0.50 $0.30 - $0.50 = 0.40 Fixed costs ÷ Contribution margin ratio = Breakeven revenues $900,000 ÷ 0.40 = $2,250,000 2. 5,000,000 ($0.50 – $0.34) – $900,000 = $ (100,000) 3. [5,000,000 (1.1) ($0.50 – $0.30)] – [$900,000 (1.1)] = $ 110,000
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This note was uploaded on 03/24/2010 for the course ACCT 300 taught by Professor Bus during the Spring '10 term at École Normale Supérieure.

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ch03sol - CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS NOTATION...

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