Instructor Assignment # 1 CVP Analysis
1. Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000.
a. What is the breakeven point in batteries?
b. What is the margin of safety, assuming sales total $60,000?
c. What is the breakeven level in batteries, assuming variable costs increase by 20%?
d. What is the breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed costs decline by $100?
2. Royer Corporation gathered the following information:
Variable costs $945,000
Income tax rate 40%
Contribution-margin ratio 30%
a. Compute total fixed costs assuming a breakeven volume in dollars of $1,350,000.
b. Compute sales volume in dollars to produce an after-tax net income of $108,000.
a. $1,350,000 x 0.30 = $405,000
b. $108,000/0.60 = $180,000
($180,000 + $405,000) / 0.3 = $1,950,000
3. Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600.
a. What is the contribution margin per lamp?
b. What is the breakeven point in lamps?
c. How many lamps must be sold to earn a pretax income of $8,000?
d. What is the margin of safety, assuming 1,500 lamps are sold?