S.ch05

# 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
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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