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Unformatted text preview: 3- 35.CVP analysis. 1.Selling price$16.00Variable costs per unit:Purchase price$10.00Shipping and handling2.0012.00Contribution margin per unit (CMU)$ 4.00Breakeven point in units = unitper margin Contr.costsFixed= $4.00$600,000= 150,000 unitsMargin of safety (units) = 200,000 – 150,000 = 50,000 units2.Since Galaxy is operating above the breakeven point, any incremental contribution margin will increase operating incomedollar for dollar.Increase in units sales = 10% × 200,000 = 20,000Incremental contribution margin = $4 × 20,000 = $80,000Therefore, 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$16.00Variable costs:Purchase price $10 × 130% $13.00Shipping and handling 2.0015.00Contribution margin per unit$ 1.00Target sales in units = CMUTOIFC+= $1$200,000$600,000+= 800,000 unitsTarget sales in dollars = $16 × 800,000 = $12,800,0003-36CVP analysis, income taxes....
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This note was uploaded on 05/27/2011 for the course ACG 3361 taught by Professor Swirsky during the Spring '11 term at Florida A&M.
- Spring '11
- Cost Accounting