Min cvp analysis decision making 1 tocchets current

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3-37 (20 min.)CVP analysis, decision making.
2. Let the selling price be P. We calculate P for which, after increasing fixed manufacturing costs by $100,000 to $900,000 and variable manufacturing cost per unit by $2 to $47, operating income is $600,000. $40,000 P ($47 × 40,000) ($10 × 40,000) $900,000 $600,000 = $600,000 $40,000 P $1,880,000 $400,000 $900,000 $600,000 = $600,000 $40,000 P = $600,000 + $1,880,000 + $400,000 + $900,000 + $600,000 $40,000 P = $4,380,000 P = $4,380,000 ÷ 40,000 = $109.50 Tocchet will consider adding the new features provided the selling price is at least $109.50 per unit.
3-27 3-38(2030 min.)CVP analysis, shoe stores. 1. CMU (SP VCU = $30 $21) $ 9.00 a. Breakeven units (FCCMU = $360,000 $9 per unit) 40,000 b. Breakeven revenues (Breakeven units SP = 40,000 units $30 per unit) $1,200,000 2. Pairs sold 35,000Revenues, 35,000 $30 $1,050,000 Total cost of shoes, 35,000 $19.50 682,500 Total sales commissions, 35,000 $1.50 52,500 Total variable costs 735,000 Contribution margin 315,000 Fixed costs 360,000 Operating income (loss) $ (45,000) 3. Unit variable data (per pair of shoes) Selling price $ 30.00 Cost of shoes 19.50 Sales commissions 0Variable cost per unit $ 19.50 Annual fixed costs Rent $ 60,000 Salaries, $200,000 + $81,000 281,000 Advertising 80,000 Other fixed costs 20,000 Total fixed costs $ 441,000 CMU, $30 $19.50 $ 10.50 a. Breakeven units, $441,000$10.50 per unit 42,000 b. Breakeven revenues, 42,000 units $30 per unit $1,260,000 4. Unit variable data (per pair of shoes) Selling price $ 30.00 Cost of shoes 19.50 Sales commissions 1.80 Variable cost per unit $ 21.30Total fixed costs $ 360,000 CMU, $30 $21.30 $ 8.70 a. Break even units = $360,000$8.70 per unit 41,380 (rounded up) b. Break even revenues = 41,380 units $30 per unit $1,241,400 5. Pairs sold 50,000Revenues (50,000 pairs $30 per pair) $1,500,000Total cost of shoes (50,000 pairs $19.50 per pair) $ 975,000 Sales commissions on first 40,000 pairs (40,000 pairs $1.50 per pair) 60,000 Sales commissions on additional 10,000 pairs [10,000 pairs ($1.50 + $0.30 per pair)] 18,000Total variable costs $1,053,000 Contribution margin $ 447,000 Fixed costs 360,000Operating income $ 87,000
3-28 Alternative approach: Breakeven point in units = 40,000 pairs Store manager receives commission of $0.30 on 10,000 (50,000 40,000) pairs. Contribution margin per pair beyond breakeven point of 10,000 pairs equals $8.70 ($30 $21 $0.30) per pair. Operating income = 10,000 pairs $8.70 contribution margin per pair = $87,000.
3-29 3-39(30 min.) CVP analysis, shoe stores (continuation of 3-38). Salaries + Commission Plan Higher Fixed Salaries Only No. of units sold CM per Unit CM Fixed Costs Operating Income CM per Unit CM Fixed Costs Operating Income Difference in favor of higher-fixed-salary-only (1) (2) (3)=(1)(2) (4) (5)=(3)(4) (6) (7)=(1)(6) (8) (9)=(7)(8) (10)=(9)(5) 40,000 $9.00 $360,000 $360,000 0 $10.50 $420,000 $441,000 $ (21,000) $(21,000) 42,000 9.00 378,000 360,000 18,000 10.50 441,000 441,000 0 (18,000) 44,000 9.00 396,000 360,000 36,000 10.50 462,000 441,000 21,000 (15,000) 46,000 9.00 414,000 360,000 54,000 10.50 483,000 441,000 42,000 (12,000) 48,000 9.00 432,000 360,000 72,000 10.50 504,000 441,000 63,000 (9,000) 50,000 9.00 450,000 360,000 90,000 10.50 525,000 441,000 84,000 (6,000) 52,000 9.00 468,000 360,000 108,000 10.50 546,000 441,000 105,000 (3,000) 54,000 9.00 486,000 360,000 126,000 10.50 567,000 441,000 126,000 0 56,000 9.00 504,000 360,000 144,000 10.50 588,000 441,000 147,000 3,000 58,000 9.00 522,000 360,000 162,000 10.50 609,000 441,000 168,000 6,000 60,000 9.00 540,000 360,000 180,000 10.50 630,000 441,000 189,000 9,000 62,000 9.00 558,000 360,000 198,000 10.50 651,000 441,000 210,000 12,000 64,000 9.00 576,000 360,000 216,000 10.50 672,000 441,000 231,000 15,000 66,000 9.00 594,000 360,000 234,000 10.50 693,000 441,000 252,000 18,000
3-30 1. See table above. The new store will have the same operating income under either

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