CH 3 Solutions Horngren 13th Edition

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

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Unformatted text preview: 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 (2025 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 . 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 . 1 000 , 105 $- 0.60 Breakeven revenues = = = $1,000,000 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....
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This note was uploaded on 01/16/2012 for the course X s taught by Professor S during the Spring '11 term at University of Central Florida.

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

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