S.ch05 - CHAPTER 5 Cost-Volume-Profit SOLUTIONS TO BRIEF...

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CHAPTER 5 Cost-Volume-Profit SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-4 High Low Difference $65,000 $32,000 = $33,000 40,000 18,000 = 22,000 $33,000 ÷ 22,000 = $1.50—Variable cost per mile. High Low Total cost Less: Variable costs 40,000 X $1.50 18,000 X $1.50 Total fixed costs $65,000 60,000 $ 5,000 $32,000 27,000 $ 5,000 © 2008 For Instructor Use Only 5-1
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BRIEF EXERCISE 5-5 1. (a) $256 = ($640 – $384) (b) 40% ($256 ÷ $640) 2. (c) $210 = ($300 – $90) (d) 30% ($90 ÷ $300) 3. (e) $1,280 = ($320 ÷ 25%) (f) $960 ($1,280 – $320) BRIEF EXERCISE 5-6 BRUNO MANUFACTURING INC. CVP Income Statement For the Quarter Ended March 31, 2008 Sales. ........................................................................ $2,200,000 Variable costs ($920,000 + $70,000 + $86,000). ... 1,076,000 Contribution margin. .............................................. 1,124,000 Fixed costs ($440,000 + $45,000 + $98,000). ........ 583,000 Net income. .............................................................. $ 541,000 BRIEF EXERCISE 5-7 (a) $520Q = $286Q + $187,200 + $0 $234Q = $187,200 Q = 800 units (b) Contribution margin per unit $234, or ($520 – $286) X = $187,200 ÷ $234 X = 800 units BRIEF EXERCISE 5-8 Contribution margin ratio = [($300,000 – $180,000) ÷ $300,000] = 40% Required sales in dollars = $160,000 ÷ 40% = $400,000 © 2008 For Instructor Use Only 5-2
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BRIEF EXERCISE 5-9 If variable costs are 60% of sales, the contribution margin ratio is ($1 – $0.60) ÷ $1 = .40. Required sales in dollars = ($195,000 + $75,000) ÷ .40 = $675,000 BRIEF EXERCISE 5-10 Contribution margin per unit $1.50 is ($6.00 – $4.50) Required sales in units = ($480,000 + $1,500,000) ÷ $1.50 = 1,320,000. BRIEF EXERCISE 5-11 Margin of safety = $1,200,000 – $840,000 = $360,000 Margin of safety ratio = $360,000 ÷ $1,200,000 = 30% © 2008 For Instructor Use Only 5-3
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SOLUTIONS TO EXERCISES EXERCISE 5-1 (a) (b) The relevant range is 4,000 – 9,000 units of output since a straight-line relationship exists for both direct materials and rent within this range. (c)
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S.ch05 - CHAPTER 5 Cost-Volume-Profit SOLUTIONS TO BRIEF...

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