Ch3 first assign sol (1)

Ch3 first assign sol (1) - 3 35 1 CVP analysis Selling...

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3- 35. CVP analysis. 1. Selling price \$16.00 Variable costs per unit: Purchase price \$10.00 Shipping and handling 2.00 12.00 Contribution margin per unit (CMU) \$ 4.00 Breakeven point in units = unit per margin Contr. costs Fixed = \$4.00 \$600,000 = 150,000 units Margin of safety (units) = 200,000 – 150,000 = 50,000 units 2. Since Galaxy is operating above the breakeven point, any incremental contribution margin will increase operating income dollar for dollar. Increase in units sales = 10% × 200,000 = 20,000 Incremental contribution margin = \$4 × 20,000 = \$80,000 Therefore, the increase in operating income will be equal to \$80,000. Galaxy’s operating income in 2008 would be \$200,000 + \$80,000 = \$280,000. 3. Selling price \$16.00 Variable costs: Purchase price \$10 × 130% \$13.00 Shipping and handling 2.00 15.00 Contribution margin per unit \$ 1.00 Target sales in units = CMU TOI FC + = \$1 \$200,000 \$600,000 + = 800,000 units Target sales in dollars = \$16 × 800,000 = \$12,800,000

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3-36 CVP analysis, income taxes. 1. Revenues – Variable costs – Fixed costs = Operating income \$500,000 – \$275,000 – \$135,000 = \$90,000 Operating income – Income taxes = Net income 0.40 × \$90,000 = \$36,000 \$90,000 –  \$36,000 = \$54,000 2. Let Q = Number of units to break even \$25.00Q – \$13.75Q – \$135,000 = 0 Q = \$135,000
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