Chapter_21_Solutions_7e

Chapter_21_Solutions_7e - Chapter 21 Cost-Volume-Profit(CVP...

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Chapter 21 Cost-Volume-Profit (CVP) Analysis Quick Check Answers: 1. b 3. a 5. d 7. b 9. a 2. d 4. b 6. a 8. c 10. c Explanations: 2. d. \$110,000 = (100,000 × \$1) + \$10,000 3. a. Breakeven sales = \$50,000 = 1,000 passengers in units \$60 \$10 4. b. Breakeven sales = \$0.60 million = \$1.5 million in dollars 0.40 Contribution margin ratio (40%) = \$3 billion \$1.8 billion \$3 billion 5. d. Target sales = \$50,000 + \$100,000 = \$375,000 in dollars 0.40 Contribution margin ratio (40%) = \$60 \$36 \$60 Chapter 21 Cost-Volume-Profit (CVP) Analysis 73

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9. a. Margin of safety (\$0) = Expected sales (\$800,000*) breakeven sales (\$800,000) *(\$600,000 + \$700,000 + \$900,000 + \$800,000 + \$1,000,000) / 5 = \$800,000 10. c. Breakeven sales = \$50,000 = 1,250 passengers in total units \$40* 625 regular 625 discount *Weighted-average = (\$60 \$10) + (\$40 \$10) = \$40 contribution margin 2 per unit Accounting 7/e Solutions Manual 74
Short Exercises (5-10 min.) S 21-1 F 1. Depreciation on routers used to cut wood enclosures V 2. Wood for speaker enclosures F 3. Patents on crossover relays V 4. Crossover relays V 5. Grill cloth V 6. Glue F 7. Quality inspector’s salary Chapter 21 Cost-Volume-Profit (CVP) Analysis 75

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(5-10 min.) S 21-2 F 1. Building rent F 2. Toys F 3. Playground equipment V 4. Afternoon snacks F 5. Sally’s salary V 6. Wages of after-school employees V 7. Drawing paper F 8. Tables and chairs Accounting 7/e Solutions Manual 76
(5-10 min.) S 21-3 Req. 1 a. Call for 20 minutes \$5.00 + (20 × \$0.35) \$5.00 + \$7.00 = \$12.00 b. Call for 40 minutes \$5.00 + (40 × \$0.35) \$5.00 + \$14.00 = \$19.00 c. Call for 80 minutes \$5.00 + (80 × \$0.35) \$5.00 + \$28.00 = \$33.00 Chapter 21 Cost-Volume-Profit (CVP) Analysis 77

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(continued) S 21-3 Req. 2 Accounting 7/e Solutions Manual 78
(5-10 min.) S 21-4 Req. 1 Variable cost per unit = Change in total cost ÷ Change in volume of activity = (\$2,400 \$2,200) ÷ (1,000 machine hours 500 machine hours) = \$200 ÷ 500 hours = \$.40 per machine hour Req. 2 Total fixed cost = Total mixed cost Total variable cost = \$2,400 (\$.40 × 1,000 machine hours) = \$2,400 \$400 = \$2,000 In this example the highest cost and volume were chosen to calculate the total fixed cost, but the lowest cost and volume also could be used to calculate the \$2,000 total fixed cost: Total fixed cost = Total mixed cost Total variable cost = \$2,200 (\$.40 × 500 machine hours) = \$2,200 \$200 = \$2,000 Chapter 21 Cost-Volume-Profit (CVP) Analysis 79

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(5-10 min.) S 21-5 Income statement approach: Sales revenue Variable costs Fixed = Operating costs income Sale price Units per unit × sold Variable cost Units Fixed = Operating per unit × sold costs income (\$60 × Units sold) (\$20 × Units sold) \$275,000 = \$0 (\$60 \$20) × Units sold \$275,000 = \$0 \$40 × Units sold = \$275,000 Units sold = 6,875 tickets Alternative: Shortcut contribution margin approach: Units sold = Fixed costs + Operating income (to break even)
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Chapter_21_Solutions_7e - Chapter 21 Cost-Volume-Profit(CVP...

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