Exam 5: Cost-Volume-Profit Analysis

Reflex Manufacturing Corp. manufactures composters at a unit variable cost of $43. It sells them for $70 each. It can produce a maximum of 3,200 composters per month. Annual fixed costs total $648,000. a) What is the break-even volume? b) What is the monthly net income at a volume of 2500 composters per month? c) What is the monthly net income if Reflex operates at 50% of capacity during a recession? d) At what percent utilization would the annual net income be $226,800? e) If fixed and variable costs remain the same, how much do the monthly break-even unit sales change for a $1 increase in the selling price?

Use the graphical approach to CVP analysis to solve the following problem. Valley Peat Ltd. sells peat moss for $10 per bag. Variable costs are $7.50 per bag and annual fixed costs are $100,000. a) How many bags of peat must be sold to break even? b) What will be the net income for a year in which 60,000 bags of peat are sold? c) How many bags must be sold for a net income of $60,000 in a year? d) What volume of sales would produce a loss of $10,000?

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 $12,000?

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.

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?

Dynacan Ltd. manufactured 10,000 units of product last year and identified the following manufacturing and overhead costs. (V denotes "variable cost" and F denotes "fixed cost.") If unit variable costs and fixed costs remain unchanged, calculate the total cost to produce 9700 units this year.

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 revenue per month required to break-even.

Memex Corp. manufactures memory expansion boards for laptop computers. The average selling price of its finished product is $180 per unit. The average variable cost per unit is $110. Memex incurs fixed costs of $1,260,000 per year. a) What is the break-even point in unit sales per year? b) What sales revenue must Memex achieve in order to break even? c) What will be the company's profit or loss at the following levels of sales for a year: 20,000 units? 17,500 units?

The Kelowna division of Windstream RVs builds the Wanderer model. The division had total revenue of $4,785,000 and a profit of $520,000 on the sale of 165 units in the first half of its financial year. Sales declined to 117 units in the second half of the year, resulting in a profit of only $136,000. Determine the selling price per unit, the total revenue in the second half, the unit variable costs, and the annual fixed costs.

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 revenue of $10,000 per month.

Sam manufactures a product that is selling so well, he has decided to expand his operation to 50,000 units per month. The unit cost is $7, estimated fixed costs are $1.8 mil per year and variable costs are $5 per unit. The product currently sells for $20. Use the graphical approach to CVP analysis to solve the following: a) What is the break-even point as a percent of capacity? b) What would the net income be at 75% capacity? c) What would unit sales have to be to attain a net income of $100,000? d) If sales dropped to 50% of capacity, what would the resulting net income be?

Morgan Company produces two products, G and H, with the following characteristics: Total fixed costs for the year are expected to be $700,000. a) What will be the net income if the forecast sales are realized? b) Determine the break-even volumes of the two products. Assume that the product mix (that is, the ratio of the unit sales for the two products) remains the same at the break-even point. c) If it turns out that Morgan sells twice as many units of H as of G, what will be the break-even volumes of the two products?

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 budgeted net income.

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.

In the past year, the Greenwood Corporation had sales of $1,200,000, fixed costs of $400,000, and total variable costs of $600,000. a) At what sales figure would Greenwood have broken even last year? b) If sales increase by 15% in the year ahead (but all prices remain the same), how much (in $) will the net income increase? c) If fixed costs are 10% lower in the year ahead (but sales and variable costs remain the same as last year), how much (in $) will the net income increase? d) If variable costs are 10% higher in the year ahead (but sales and fixed costs remain the same as last year), how much (in $) will the net income decrease?

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. How much profit should Weiner realize on the sale of 3,000 hot dogs?

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?

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?

Durable Toys Inc. wants to calculate from recent production data the monthly fixed costs and unit variable costs on its Mountain Trike product line. In the most recent month, it produced 530 Trikes at a total cost of $24,190. In the previous month, it produced 365 Trikes at a total cost of $18,745. What are the fixed costs per month and the unit variable costs? Hint: Recall that Total costs = Fixed costs + (Unit variable costs) × (Number of units produced)

Shannon Vale is considering the start-up of a service company. She has compiled information on costs as follows: With the cost data provided, determine the fixed costs and variable cost per km.