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  • Trotman 5e Practice Problems Management Accounting Supplement M2

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    Steven
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    This document provides solutions to three practice problems on cost-volume-profit analysis: 1. The first problem calculates break-even point in units (2,000) and sales beyond break-even ($120,000). 2. The second problem calculates break-even point in units (14,286) and sales dollars ($865,732) for a company with two products. It also calculates the sales volume and mix needed to achieve a desired profit level. 3. The third problem calculates break-even point in sales dollars ($333,513) for a given contribution margin ratio. It then calculates the revenue needed to cover fixed costs and achieve a target after-tax profit of $250,000

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    Trotman 5e Practice Problems Management Accounting Supplement M2

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    This document provides solutions to three practice problems on cost-volume-profit analysis: 1. The first problem calculates break-even point in units (2,000) and sales beyond break-even ($120,000). 2. The second problem calculates break-even point in units (14,286) and sales dollars ($865,732) for a company with two products. It also calculates the sales volume and mix needed to achieve a desired profit level. 3. The third problem calculates break-even point in sales dollars ($333,513) for a given contribution margin ratio. It then calculates the revenue needed to cover fixed costs and achieve a target after-tax profit of $250,000

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    30 views3 pages

    Trotman 5e Practice Problems Management Accounting Supplement M2

    Uploaded by

    Steven
    This document provides solutions to three practice problems on cost-volume-profit analysis: 1. The first problem calculates break-even point in units (2,000) and sales beyond break-even ($120,000). 2. The second problem calculates break-even point in units (14,286) and sales dollars ($865,732) for a company with two products. It also calculates the sales volume and mix needed to achieve a desired profit level. 3. The third problem calculates break-even point in sales dollars ($333,513) for a given contribution margin ratio. It then calculates the revenue needed to cover fixed costs and achieve a target after-tax profit of $250,000

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    M2 Cost-Volume-Profit Analysis Solutions

    Practice Problem A

    1.

    CM

    =
    =

    BE in units

    =
    =

    2.

    Sales in units

    3,000

    200 80
    120
    240,000
    120
    2,000 units

    FC + P
    Unit CM
    240,000 + P
    120
    $120,000

    or

    Sales beyond BE x Unit CM


    (3,000 2,000) x 120 = $120,000

    3.

    3,000 x 30
    =
    i.e. extra $30 CM per unit

    $90,000

    Practice Problem B

    1.

    The contribution margin per unit for x and y:


    CMX

    =
    45 32
    =
    13
    CMY
    =
    84 65
    =
    19
    The weighted average contribution margin per unit:
    =
    (13 0.60) + (19 0.40)
    =
    15.40
    Break-even point

    B-E in sales dollars


    Comprised as follows:
    Total
    14,286 units
    $865,732

    2.

    Required sales volume

    FC
    CM

    $220,000
    $15.40

    14,286 units

    $865,732

    Product X
    = 8,572
    = $385,740

    Product Y
    5,714
    $479,976

    +
    +

    FC + desired profit
    CM

    $220,000 + $180,000
    $15.40

    25,974 units
    or
    $1,574,026

    Comprised as follows:

    Total sales
    Units 25,974
    $1,574,026

    = Product X
    =
    15,585
    = $701,325

    +
    +
    +

    Product Y
    10,390
    $872,760

    Practice Problem C

    1.

    CM ratio = 372,327 = 0.464


    802,429
    Break-even point in dollars

    2.

    Before tax profit

    Fixed expenses
    CM ratio

    154,750
    0.464

    $333,513

    After tax profit


    1-t

    175,000
    0.7

    250,000

    Revenue to be earned =

    154,750 + 250,000
    0.464
    $872,306

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