Warr22e_IM_TM_Ch21 - Transparency Master 21-1 MIXED COSTS...

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Unformatted text preview: Transparency Master 21-1 MIXED COSTS Machine Power Hours Costs April................................. 15,000 $1,950 May.................................. 17,000 $2,080 June................................ 18,000 $2,150 July.................................. 14,000 $1,900 August............................ 20,000 $2,200 September...................... 19,000 $2,170 Transparency Master 21-2 COST-VOLUME-PROFIT (CVP) ANALYSIS Abner Corporation makes a product that sells for $200 per unit. The variable costs to make this product are $120 per unit. Fixed costs total $500,000 for a year. Abner currently sells 7,500 units each year. 1. Calculate the number of units that Abner must sell to break even. 2. Calculate the number of units that Abner must sell to make $200,000 in profit. 3. Abner can purchase equipment that will auto- mate its production facility. This equipment will raise Abner's fixed costs to $600,000 per year. Automation will cause the product's variable costs to drop to $100 per unit. How many units will Abner need to sell to make a $200,000 profit if the factory is automated? 4. Abner estimates that $40,000 of radio advertising could increase the company's sales by 10%. Should the company purchase the radio ads? (Use the original cost data to answer this ques- tion; do not include any changes due to factory automation.) Transparency Master 21-3 COST-VOLUME-PROFIT (CVP) ANALYSIS Solution Abner Corporation makes a product that sells for $200 per unit. The variable costs to Abner Corporation makes a product that sells for $200 per unit....
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This note was uploaded on 04/20/2010 for the course BUSINESS Accounting taught by Professor Ebiohuche during the Spring '10 term at DeVry Manhattan.

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Warr22e_IM_TM_Ch21 - Transparency Master 21-1 MIXED COSTS...

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