Cost Volume Profit Analysis Handout PDF

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Strategic Cost Managementby Mowen & HansenProblem A Costs, Contribution Margin, Contribution Margin RatioSuper-Tees Company plans to sell 12,000 T-shirts at P16 each in the coming year. Product costs include:Direct materials per T-shirt P5. Direct labor per T-shirt P1. Variable overhead per ...

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Strategic Cost Management by Mowen & Hansen Problem A.Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Company plans to sell 12,000 T-shirts at P16 each in the coming year. Product costs include: Direct materials per T-shirt Direct labor per T-shirt Variable overhead per T-shirt Total fixed factory overhead

P5.75 P1.25 P0.60 P43,000

Variable selling expense is the redemption of a coupon, which averages P0.80 per T-shirt; fixed selling and administrative expenses total P19,000. a. Variable product cost per unit b. Total variable cost per unit c. Contribution margin per unit d. Contribution margin ratio e. Total fixed expense for the year Problem B. Break-Even Units: Units for Target Profit Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 16,000 units at a price of P320 each. Product costs include: Direct materials P68 Direct labor P40 Variable overhead P12 Total fixed factory overhead P500,000 Variable selling expense is a commission of 5 percent of price; fixed selling and administrative expenses total P116,400. a. Calculate the sales commission per unit sold. b. Calculate the contribution margin per unit. c. How many units must Jay-Zee sell to break even? d. Calculate the number of units Jay-Zee Company must sell to achieve target operating income (profit) of P333,408. Problem C. Break-Even Sales: Sales for Target Profit Health-Temp Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Health-Temp Company believes it will place temporary nurses for a total of 23,500 hours next year. Health-Temp charges the hospitals and clinics P90 per hour and has variable costs of P75.60 per hour (this includes the payment to the nurse). Total fixed costs equal P321,000. a. b. c. d.

Compute the contribution margin per unit Compute the contribution margin ratio Calculate the sales revenue needed to break even Calculate the sales revenue needed to achieve a target profit of P100,000.

Problem D. After-Tax Profit Targets Olivian Company wants to earn $420,000 in net (after-tax) income next year. Its product is priced at $275 per unit. Product costs include: Direct materials $90 Direct labor $65 Variable overhead $16 Total fixed factory overhead $440,000 Variable selling expense is $14 per unit; fixed selling and administrative expense totals $290,000. Olivian has a tax rate of 40 percent. a. Calculate the before-tax profit needed to achieve an after-tax target of $420,000. b. Calculate the number of units that will yield operating income calculated in Requirement 1 above. Problem E. Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 30,000 ceiling fans and 70,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $60 $15 Unit variable cost $12 $7 Direct fixed cost $23,600 $45,000 Common fixed selling and administrative expenses total $85,000. a. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)? Sales mix of ceiling fans to table fans = : b. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even?...