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CH 3 Solutions Horngren 13th Edition

CH 3 Solutions Horngren 13th Edition - CH 3 Solutions...

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CH 3 Solutions Horngren 13 th Edition 3-20 (20 min.) CVP exercises. 1a. [Units sold (Selling price – Variable costs)] – Fixed costs = Operating income [5,000,000 (\$0.50 – \$0.30)] – \$900,000 = \$100,000 1b. Fixed costs ÷ Contribution margin per unit = Breakeven units \$900,000 ÷ [(\$0.50 – \$0.30)] = 4,500,000 units Breakeven units × Selling price = Breakeven revenues 4,500,000 units × \$0.50 per unit = \$2,250,000 or, Contribution margin ratio = price Selling costs Variable price Selling - = \$0.50 \$0.30 - \$0.50 = 0.40 Fixed costs ÷ Contribution margin ratio = Breakeven revenues \$900,000 ÷ 0.40 = \$2,250,000 2. 5,000,000 (\$0.50 – \$0.34) – \$900,000 = \$ (100,000) 3. [5,000,000 (1.1) (\$0.50 – \$0.30)] – [\$900,000 (1.1)] = \$ 110,000 4. [5,000,000 (1.4) (\$0.40 – \$0.27)] – [\$900,000 (0.8)] = \$ 190,000 5. \$900,000 (1.1) ÷ (\$0.50 – \$0.30) = 4,950,000 units 6. (\$900,000 + \$20,000) ÷ (\$0.55 – \$0.30) = 3,680,000 units 3-22 (20–25 min.) CVP analysis, income taxes. 1. Variable cost percentage is \$3.20 ÷ \$8.00 = 40% Let R = Revenues needed to obtain target net income R – 0.40 R – \$450,000 = 30 . 0 1 000 , 105 \$ - 0.60 R = \$450,000 + \$150,000 R = \$600,000 ÷ 0.60 R = \$1,000,000 or, Target net income 1 Tax rate - Contribution margin percentage Proof: Revenues \$1,000,000 Variable costs (at 40%) 400,000 Contribution margin 600,000 Fixed costs 450,000 Operating income 150,000 Income taxes (at 30%) 45,000 Net income \$ 105,000 \$450,000 + 30 . 0 1 000 , 105 \$ - 0.60 Breakeven revenues = = = \$1,000,000

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2.a. Customers needed to earn net income of \$105,000: Total revenues ÷ Sales check per customer \$1,000,000 ÷ \$8 = 125,000 customers b. Customers needed to break even: Contribution margin per customer = \$8.00 – \$3.20 = \$4.80 Breakeven number of customers = Fixed costs ÷ Contribution margin per customer = \$450,000 ÷ \$4.80 per customer = 93,750 customers 3. Using the shortcut approach: Change in net income = × × (1 – Tax rate) = (150,000 – 125,000) × \$4.80 × (1 – 0.30) = \$120,000 × 0.7 = \$84,000 New net income = \$84,000 + \$105,000 = \$189,000 The alternative approach is: Revenues, 150,000 × \$8.00 \$1,200,000 Variable costs at 40% 480,000 Contribution margin 720,000 Fixed costs 450,000 Operating income 270,000 Income tax at 30% 81,000 Net income \$ 189,000 3-24 (10 min.) CVP analysis, margin of safety. 1. Breakeven point revenues = percentage margin on Contributi costs Fixed Contribution margin percentage = \$600,000 \$1,500,000 = 0.40 or 40% 2. Contribution margin percentage = price Selling unit per cost Variable price Selling - 0.40 = SP
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CH 3 Solutions Horngren 13th Edition - CH 3 Solutions...

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