Exam 5: Cost-Volume-Profit Analysis

Use the graphical approach to CVP analysis to solve the following problem. Jordan is developing a business plan for a residential building inspection service he wants to start up. Rent and utilities for an office would cost $1,000 per month. The fixed costs for a vehicle would be $450 per month. He estimates that the variable office costs (word processing and supplies) will be $50 per inspection and variable vehicle costs will be $25 per inspection. Jordan would also spend $200 per month to lease a computer, and $350 per month for advertising. a) If he charges $275 per inspection, how many inspections per month are required before he can "pay himself?" b) How many inspections per month are required for Jordan to be able to draw a salary of $4,000 per month?

Use the Texas Instruments BAII plus break-even worksheet to solve the following. Recall: FC: total fixed costs VC: Variable costs per unit P: Selling price per unit (S in textbook) PFT: Profit or Net Income Q: Number of units sold (x in textbook) Toys-4-U manufactures a toy that it sells for $65.00 each. The variable cost per toy is $15 and the fixed costs for this product line are $250,000 per year. What number of sales would generate a profit of $5000?

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What is the break-even point as a percent of capacity?

Kuldip's factory manufactures toys that sell for $29.95 each. The variable cost per toy is $11, and the total fixed costs for the month are $45,000. What would unit sales have to be to attain a net income over $8,000?

Determine the monthly profit (loss) if it sells 325 units per month.

Use the graphical approach to CVP analysis to solve the following problem. Huntsville Office Supplies (HOS) is evaluating the profitability of leasing a photocopier for its customers to use on a self-serve basis at 10¢ per copy. The copier may be leased for $300 per month plus 1.5¢ per copy on a full-service contract. HOS can purchase paper at $5 per 500-sheet ream. Toner costs $100 per bottle, which in normal use will last for 5,000 pages. HOS is allowing for additional costs (including electricity) of 0.5¢ per copy. a) How many copies per month must be sold in order to break even? b) What will be the increase in monthly profit for each 1,000 copies sold above the break-even point?

The current annual budget for Armstrong Ltd. indicates total revenue of $8,000,000. The total variable costs are $1,600,000 and fixed costs are $5,600,000. Calculate the total sales revenue for the year that would be needed for a profit of $2,750,000.

Use the graphical approach to CVP analysis to solve the following problem. Canada Bagel Company manufactures packages of bagels that it sells for $2.50. The variable costs per package are $1.00. a) To just break even, how many packages of bagels must be sold per month if the fixed costs are $60,000 per month? b) What must unit sales be in order to have a profit of $7,500 per month?

A small business calculates that its monthly fixed costs are $4,200. If the business calculates it contribution rate to be 0.32, what level of monthly sales must be generated in order to break even?

Use the graphical approach to CVP analysis to solve the following problem. Reflex Manufacturing Corp. manufactures borgels at a unit variable cost of $43. It sells them for $70 each. It can produce a maximum of 3,200 borgels per month. Annual fixed costs total $648,000. a) What is the break-even volume per month? b) What is the monthly net income at a volume of 2500 borgels per month? c) What is the monthly net income if Reflex operates at 50% of capacity during a recession?

Weiner's Hot Dog Stand sells hot dogs for $2.50 each. The variable cost per hot dog is $1.75 and fixed costs per month are $1,800. If Weiner's fixed cost per month was to increase to $2,880, to what level would he have to reduce his variable cost per hot dog in order to maintain the current break-even point in units?

Cliff runs a restaurant in a small town known for its theatres and tourist attractions. Cliff charges an average of $18 per meal. He estimates his variable costs to be $6 per meal and fixed costs are $12,000 per month. Cliff has the capacity to serve 2,000 meals per month. At full capacity, what is Cliff's net income?

Once a business is operating beyond the break-even point, why doesn't each additional dollar of revenue add a dollar to net income?

The current annual budget for Armstrong Ltd. indicates total revenue of $8,000,000. The total variable costs are $1,600,000 and fixed costs are $5,600,000. Calculate break-even revenue per year.

A manufacturing company is considering producing a new product. The variable cost of the new product is $60 per unit, and the total fixed costs are $75,000 for a month. The company could produce 1,500 units per month, and sell the product for $125 each. What would be the net income at 90% capacity?

A small company can produce 500 dolls per week. The doll retails for $30. The variable costs are $7.50 per doll and fixed costs are $9,000 per week. How many dolls must be sold each week to produce a net income of $2250?

Ace Corporation's variable costs are equal to 43% of sales revenue. Their fixed costs per month are $600,000. Calculate the net income on sales of $2,000,000 per month.

The selling price of a widget is $15 and the fixed cost per month is $4,800. The variable cost per widget is $9. Calculate the net income on sales of 850 units per month.

Larissa manufactures rings which sell in her boutique for $60 each. For 100 rings, the material cost is $15 each, and estimated fixed costs are $900. How many rings must Larissa sell to break even? Use the graphical approach to CVP analysis to solve.

How many units must be sold per month to earn a profit of $7,000?