ACCT 2230 Lecture Notes - Lecture 4: Oatmeal, Income Statement, Contribution Margin

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ceruleanalpaca747

13 Jan 2018

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Cost volume profit: analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit. Focuses on how profits are affected by 1) prices of products 2) volume or level or activity 3) per unit variable costs 4) total fixed costs 5) mix of products sold. The contribution to the income statement emphasizes the behaviour of costs and therefore is extremely helpful to a manager in judging the impact on profits of changes in selling price, cost, or volume. Contribution margin: the amount remaining from sales revenue after variable expenses have been deducted. It is the amount available to cover fixed expenses and them to provide profits for the period. Cm is used first to cover the fixed expenses, then whatever remains goes towards profits. Once the break-even point is reached, operating income will increase by the unit cm for each additional unit sold.

Related Questions

Break-Even Sales Under Present and Proposed Conditions

Battonkill Company, operating at full capacity, sold 172,900units at a price of $126 per unit during 2014. Its income statementfor 2014 is as follows:

Sales		$21,785,400
Cost of goods sold		7,728,000
Gross profit		$14,057,400
Expenses:
Selling expenses	$3,864,000
Administrative expenses	2,310,000
Total expenses		6,174,000
Income from operations		$7,883,400

The division of costs between fixed and variable is asfollows:

	Fixed	Variable
Cost of goods sold	40%	60%
Selling expenses	50%	50%
Administrative expenses	70%	30%

Management is considering a plant expansion program that willpermit an increase of $2,142,000 in yearly sales. The expansionwill increase fixed costs by $285,600, but will not affect therelationship between sales and variable costs.

Required:

1. Determine for 2014 the total fixed costs andthe total variable costs.

Total fixed costs	$
Total variable costs	$

2. Determine for 2014 (a) the unit variablecost and (b) the unit contribution margin.

Unit variable cost	$
Unit contribution margin	$

3. Compute the break-even sales (units) for2014.
units

4. Compute the break-even sales (units) underthe proposed program.
units

5. Determine the amount of sales (units) thatwould be necessary under the proposed program to realize the$7,883,400 of income from operations that was earned in 2014.
units

6. Determine the maximum income from operationspossible with the expanded plant.
$

7. If the proposal is accepted and sales remainat the 2014 level, what will the income or loss from operations befor 2015?
$ SelectIncomeLoss

lemonbeaver448

Break-Even Sales Under Present and Proposed Conditions

Battonkill Company, operating at full capacity, sold 172,900units at a price of $126 per unit during 2014. Its income statementfor 2014 is as follows:

Sales		$21,785,400
Cost of goods sold		7,728,000
Gross profit		$14,057,400
Expenses:
Selling expenses	$3,864,000
Administrative expenses	2,310,000
Total expenses		6,174,000
Income from operations		$7,883,400

The division of costs between fixed and variable is asfollows:

	Fixed	Variable
Cost of goods sold	40%	60%
Selling expenses	50%	50%
Administrative expenses	70%	30%

Required: PLEASE JUST ANSWER QUESTIONS 5,67

1. Determine for 2014 the total fixed costs andthe total variable costs.

Total fixed costs	$
Total variable costs	$

2. Determine for 2014 (a) the unit variablecost and (b) the unit contribution margin.

Unit variable cost	$
Unit contribution margin	$

3. Compute the break-even sales (units) for2014.
units

4. Compute the break-even sales (units) underthe proposed program.
units

5. Determine the amount of sales (units) thatwould be necessary under the proposed program to realize the$7,883,400 of income from operations that was earned in 2014.
units

6. Determine the maximum income from operationspossible with the expanded plant.
$

7. If the proposal is accepted and sales remainat the 2014 level, what will the income or loss from operations befor 2015?
$

apricotherring974

A single product is made by Botaniko, Inc. The company's December 2018 income statement is below.

Sales (5,000 units) $150,000
Less variable expenses (75,000)
Contribution margin 75,000
Less fixed expenses (30,000)
Net income $ 45,000

Required:

a. Contribution margin per unit is $ ________ per unit
b. If sales are doubled to $300,000, total variable costs will equal $ ________
c. If sales are doubled to $300,000, total fixed costs will equal $ ________
d. If 20 more units are sold, profits will increase by $ ________
e. Compute how many units must be sold to break even # ________
(Based on the initial data)
f. Compute how many units must be sold to achieve profits of $30,000 # ________
(Based on the initial data)

amethystwolf957

ACCT 2230 Lecture Notes - Lecture 4: Oatmeal, Income Statement, Contribution Margin

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