Tutorial work week 10 PDF

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Tutorial 11 Cost volume profit analysis Chapter 4 1.

- FC - FC - VC

- VC - FC - FC - VC - FC

2. Total costs = 32,400 + (35.00 x 450) = $48,150

Chapter 5 6. a) operating leverage = contribution margin / net income net income = contribution margin – fixed costs = 300,000 600,000/ 300,000 =2 b) Sales (420,000 units) Variable costs Contribution margin Fixed costs Net profit

1,400,000 560,000 840,000 300,000 540,000

15. Sales price Variable expenses Contribution margin Sales mix (units)

Cinnamon $22 12 10 1 10

Total is $26.00 Weighted average contribution margin: 26.00/ (1+2+2) = 5.2 a) Breakeven sales: 780,000/5.2 = 150,000

Peppermint $30 24 6 2 12

Mango $34 32 2 2 4

b) Breakeven sales: Cinnamon: 150,000 x 1/5 =30,000 Peppermint: 150,000 x 2/5 = 60,000 Mango: 150,000 x 2/5 = 60,000 c) - reducing the amount of fixed costs - reducing the variable costs per unit—thereby increasing the unit's contribution margin - improving the sales mix by selling a greater proportion of the products having larger contribution margins - increasing selling prices so long as the number of units sold will not decline significantly. 17. Sales Less: variable costs Direct labour Variable production overhead Variable selling and administrative expenses Total Divided by CM per tonne CM calculation per tonne

10,000,000 3,000,000 400,000 100,000 6,500,000 50,000 130

a) Breakeven units: Fixed costs/contribution margin per unit 600,000/130 = 4616 b) Contribution margin ratio: Company sales – variable expenses 3,500,000/10,000,000 = 0.35 c) Yes, they should increase advertising as it will increase sales and this will therefore increase the contribution margin by $390,000. If it becomes a fixed cost it will increase the net income by 9$0,000 19. a) Contribution margin per unit: Contribution margin/units sold 2,100,000-700,000 = 1,400,000 1,400,000/14,000 = 100 Breakeven units: Fixed costs/contribution margin per unit

600,000/100 = 6000 b) Fixed costs + target profit / contribution margin per unit = (600,000 + 30,000)/100 = 6300 units c) Profit Sales (14,000 x $150) Less: Variable costs (14,000 x 50) Contribution margin (14,000 x 100) Fixed costs Net income d) 20% of 150 = $30 (decrease by 20%) 150 – 30 = $120 sale price New contribution margin = $70 Breakeven: 600,000/70 = 8572 units e) 40% of $50 = $20 (decrease by 40%) 50 – 20 = $30 variable costs New contribution margin = 120 Breakeven: 600,000/120 = 5000 f) Breakeven: 700,000/100 = 7000

14,000 2,100,000 700,000 1,400,000 600,000 800,000...