S3 - 3-16(10 min.)CVP

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Unformatted text preview: 3-16(10 min.)CVP computations.VariableFixedTotalOperatingContributionContributionRevenuesCostsCostsCostsIncomeMarginMargin %a.$2,000$ 500$300$ 800$1,200$1,50075.0%b.2,0001,5003001,80020050025.0%c.1,0007003001,00030030.0%d.1,5009003001,20030060040.0%3-17(1015 min.)CVP computations. 1a.Sales ($68 per unit 410,000 units)$27,880,000Variable costs ($60 per unit 410,000 units)24,600,000Contribution margin$ 3,280,0001b.Contribution margin (from above)$3,280,000Fixed costs1,640,000Operating income$1,640,0002a.Sales (from above)$27,880,000Variable costs ($54 per unit 410,000 units)22,140,000Contribution margin$ 5,740,0002b.Contribution margin$5,740,000Fixed costs5,330,000Operating income$ 410,0003.Operating income is expected to decrease by $1,230,000 ($1,640,000 $410,000) if Ms. Schoenens proposal is accepted.The management would consider other factors before making the final decision. It is likely that product quality would improve as a result of using state of the art equipment. Due to increased automation, probably many workers will have to be laid off. Garretts management will have to consider the impact of such an action on employee morale. In addition, the proposal increases the companys fixed costs dramatically. This will increase the companys operating leverage and risk. 3-18 (3540 min.)CVP analysis, changing revenues and costs. 1a. SP = 6% $1,500 = $90 per ticketVCU= $43 per ticketCMU= $90 $43 = $47 per ticketFC= $23,500 a monthQ= = = 500 tickets 1b. Q= = 3-= = 862 tickets (rounded up)2a.SP= $90 per ticketVCU = $40 per ticketCMU= $90 $40 = $50 per ticketFC = $23,500 a monthQ= = = 470 tickets 2b.Q= = = = 810 tickets 3a.SP= $60 per ticketVCU = $40 per ticketCMU= $60 $40 = $20 per ticketFC = $23,500 a monthQ= = = 1,175 tickets 3b.Q= = = = 2,025 ticketsThe reduced commission sizably increases the breakeven point and the number of tickets required to yield a target operating income of $17,000:6%CommissionFixed(Requirement 2)Commission of $60Breakeven point4701,175Attain OI of $10,0008102,0254a.The $5 delivery fee can be treated as either an extra source of revenue (as done below) or as a cost offset. Either approach increases CMU $5:SP= $65 ($60 + $5) per ticketVCU = $40 per ticketCMU= $65 $40 = $25 per ticket3-FC = $23,500 a monthQ= = = 940 tickets4b.Q= = = = 1,620 ticketsThe $5 delivery fee results in a higher contribution margin which reduces both the breakeven point and the tickets sold to attain operating income of $17,000.3-3-19(20 min.)CVP exercises.RevenuesVariableCostsContributionMarginFixedCostsBudgetedOperatingIncomeOrig.$10,000,000G$8,000,000G$2,000,000$1,800,000G$200,0001.10,000,0007,800,0002,200,000a1,800,000400,0002.10,000,0008,200,0001,800,000b1,800,0003.10,000,0008,000,0002,000,0001,890,000c110,0004.10,000,0008,000,0002,000,0001,710,000d290,0005.10,800,000e8,640,000f2,160,0001,800,000360,0006.9,200,000g7,360,000h1,840,0001,800,00040,0007.11,000,000i8,800,000j2,200,0001,980,000k220,000...
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S3 - 3-16(10 min.)CVP

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