CHAPTER 6 COST VOLUME - PROFIT MATH 01 Menlo Company manufactures and sells a single product.

ct. The companys sales and expenses for last quarter follow: Total Per Unit Sales !"#$## %& # 'ess: (aria)le *xpenses +,#$## +& # Contri)ution Margin &-#$## # 'ess: .ixed *xpenses &+/$## # 0et 1perating 2ncome "!$## # 3equired: +. 4hat is the quarterly )rea56e7en point in units sold and in sales dollar8 &. 9ow many units would ha7e to )e sold each quarter to earn a target profit of :#$###8 %. 3efer to the original data. Compute the companys margin of safety in )oth dollar and percentage terms. !. 4hat is the companys CM ratio8 2f sales increase )y "#$### per quarter and there is no change in fixed expenses$ )y how much would you expect quarterly net operating income to increase8 MATH 02 The 9artford Symphony ;uild is planning its annual dinner dance. The dinner dance committee has assem)led the following expected costs for the e7ent:
Dinner (per person F#$ors #n% pro&r#' (per person (#n% Ren)#* o+ (#**roo' Pro+ession#* en)er)#in'en) %,rin& in)er'ission Ti-.e)s #n% #%$er)ise'en) The committee mem)ers would li5e to charge !# per person for the e7enings acti7ities. Re/,ire'en)s0 (# (1 !2" " "### +&## ,## +!##

Compute the )rea5 < e7en point for the dinner < dance =in terms of the num)er of persons who must attend> ?ssume that last year only %"# persons attended the dinner < dance. 2f the same num)er attends this year$ what price per tic5et must )e charged in order to )rea5 < e7en8 9ow many tic5ets would ha7e to )e sold )y the company at the selling price of %" to yield a minimum net operating income of %"$###8 Prepare a C(P graph for the dinner < dance and indicate the )rea5 < e7en point on the graph. 0um)er of persons should )e placed on the hori@ontal =A> axis$ and dollar should )e placed on the 7ertical =B> axis.

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MATH 02 1ut)ac5 1utfitter sells recreational equipment. 1ne of the Companys products$ a small camp sto7e$ sells for "# per unit. (aria)le expenses are %& per sto7e$ and fixed expenses associated with the sto7e total +$#,$### per month. 3equired: +. Compute the )rea56e7en point in num)er of sto7es and in total sales dollar. &. 2f the 7aria)le expense per sto7e increases as percentage of selling price$ will it result in a higher or lower )rea56 e7en point8 49B8 %. ?t present the company is selling ,### sto7es per month. The sales manager is con7inced that a +#C reduction in the selling price would result in a &"C increase in monthly sales of sto7es. Prepare two contri)ution income

statements$ one under present operating conditions and one as operations would appear after the proposed changes. !. 3efer to the data in =%> a)o7e. 9ow many sto7es would ha7e to )e sold at new selling price to yield a minimum operating income of %"$### per month8 MATH 03 Serendipity Sound$ 2nc. manufactures and sells compact discs. Price and cost data are as follows: Selling price per unit=pac5age of two CDs> &".## (aria)le Costs Per unit: Direct Material +#."# Direct 'a)or ".## Manufacturing 17erhead %.## Selling *xpenses +.%# Total (aria)le Cost Per Unit +:.,# ?nnual .ixed Costs: Manufacturing 17erhead +:&$### Selling and ?dministrati7e &-/$### Total fixed costs !/,$### .orecasted ?nnual Sales (olume=+&#$### Units> %$###$### 2n the following requirements$ ignore income taxes: 3equired: +. 4hat is Serendipity Sounds Erea5 < *7en point in units8 &. 4hat is the companys )rea56e7en point in sales dollar8 %. 9ow many units would Serendipity Sound ha7e to sell in order to earn &/#$###8 !. 4hat is the firms margin of safety8 ". Management estimates that direct6la)or costs will increase )y ,C next year. 9ow many units will the company ha7e to sell next year to reach its )rea56e7en8 /. 2f the companys direct la)or costs do increase )y ,C$ what selling price per unit of product must it charge to maintain the same contri)ution < margin ratio8