This preview shows page 1. Sign up to view the full content.
Unformatted text preview: rents spaces for
recreational vehicles (RVs) by the day. HDC charges
$15 per day for a space. The variable costs (including
cleaning, maintenance, and supplies) are $7 per day.
The ﬁxed costs of HDC are $60,000 per year. HDC is
subject to a tax rate of 35 percent on its income. If a
“unit” is one space rented for one day, how many units
does HDC have to rent annually to earn $48,750 after
taxes?
Suppose HDC rents spaces for both RVs and tent
camping. The price and cost characteristics for each
are as follows (one unit is a tent or RV space rented for
one day): Price per
Unit
Tent space . . . .
RV space . . . . . Variable Cost
per Unit Units Rented
per Year $6
15 $3
7 6,000
9,000 CHAPTERS IN PART ONE The ﬁxed costs of HDC are $60,000 annually. Assuming
the mix of tent and Yourself Successful as the current
1 Making RV spaces is the same in College
mix, how many tent spaces and how many RV spaces
must be rented annually for HDC to break even? 2 Approaching College Reading and 3 Approaching College Assignments:
Reading Textbooks and Following Directions The solutions to these questions are at the end of the chapter on
Developing a CollegeLevel Vocabulary
page 109. The Debrief
Jamaal Kidd considered the spreadsheet he developed
for his business and reﬂected on how it will help him as a
manager:
The costvolumeprofit analysis I learned in this
chapter gives me a simple and intuitive approach to understanding how my decisions affect my proﬁts.
I know that there are limitations to the use of CVP analysis and that for many decisions, I will want to develop
✓ Related Resources
more detailed analyses. But for quick answers for rouSee pages 000 to 000
tine decisions, CVP analysis is just what I need.
of the Annotated Instructor’s
Edition for general suggestions related to the chapters
in Part One. Summary
The cost analysis approach to decision making is used when the decisions affect costs and revenues
and, hence, proﬁt. In this chapter we considered the costvolumeproﬁt (CVP) analysis framework
cor50782_ch01_001072.indd for cost analysis.
1 lan27114_ch03_080109.indd
lan27114_ch03_080109.indd 94 1 10/5/09 11:09:29 PM 10/22/09 10:34:02 PM REVISED PAGES Chapter 3 Fundamentals of CostVolumeProfit Analysis 1 95 The following summarizes key ideas tied to the chapter’s learning objectives. PART L.O. 1. Use costvolumeproﬁt (CVP) analysis to analyze decisions. CVP analysis is both
a management tool for determining the impact of selling prices, costs, and volume on
proﬁts and a conceptual tool, or way of thinking, about managing a company. It helps
management focus on the objective of obtaining the best possible combination of prices,
volume, variable costs, and ﬁxed costs. CVP analysis examines the impact of prices,
costs, and volume on operating proﬁts, as summarized in the proﬁt equation
Proﬁt PX (VX F) Orientation where
P
V
X
F Average unit selling price
Average unit variable costs
Quantity of output
Total ﬁxed costs Pr...
View Full
Document
 Spring '07
 MEJIAS

Click to edit the document details