E22.
Contribution margin per unit = unit selling price – unit variable costs = 60 – (12 + 10 + 2) = 36
BEP in units = fixed cost / contribution margin per unit = (1400 + 200 + 2000) / 36 = 100 lawns
Contribution margin ratio = CMP unit / unit selling price = 36 / 60 * 100 = 60%
BEP in dollars = fixed cost / contribution margin ratio = (1400 + 200 + 2000) / 60% = 6000 dollars
E22.13
a. Unit contribution margin = unit selling price – unit variable costs = 400 – 280 = 120
b. BILLINGS COMPANY
CVP Income Statement
For the month ended September 30, 2020
c. Break-even point in units = fixed cost / CMP unit = 54000 / 120 = 450
d. BILLINGS COMPANY
CVP Income Statement
For the month ended September 30, 2020
E22.14
a. Unit contribution margin = 150 – 90 = 60
BEP in units = fixed cost / CMP = 570000/60 = 9500
Profit in 2019 = 60Q = 210000 => Q = 210000/60 = 3500
Number of units sold in 2019 = 3500 + 9500 = 13000
b. Number of units sold in 2020 to reach the stockholders’ desired profit level:
Required sales in units = fixed cost + net income in 2020 / CMP = 832000 / 60 = 13867
c. Sales in 2020 = variable costs + fixed costs + net income 2020
(13000 * 90) + 570000 + 262000 = 1170000 + 570000 + 262000 = 2002000
Selling price per unit = 2002000 / 13000 = 154
E22.15
Variable costs per unit = 240000/5000 = 48
Price per unit = 400000 / 5000 = 80
Contribution margin = Sales – variable cost = 400000 – 240000 = 160000
Net income = contribution margin – fixed costs = 160000 – 90000 = 70000
Quantity 5000
sales 400000
Total Variable costs 240000
Fixed costs 90000
Selling price per unit 80
Variable costs per unit 48
Net Income 70000
a. Increase selling price by 10%
80 + 10% = 88
Sales = 88 * 5000 = 440000
Contribution margin = sales – variable costs = 440000 – 240000 = 200000
Net income = contribution margin – fixed cost = 200000 – 90000 = 110000
Price 88
Sales 440000
Net Income 110000
2) Reduce variable costs to 55% of sales
Variable cost = 400000 * 55% = 220000
Contribution margin = sales – variable cost = 400000
– 220000 = 180000
Net income = contribution margin – fixed costs =
180000 – 90000 = 90000
Total variable costs 220000
Net Income 90000
Action A produce higher net income
E22.17
Sales: 2,500 units
Sales price: $40 per unit
Variable costs: $24 per unit
Fixed costs: $19,500
a. Contribution margin per unit = sales – variable costs = 40 – 24 = 16
Contribution margin ratio = CMP unit / sales = 16 / 40 * 100 = 40%
b. BEP in unit = fixed costs / CMP unit = 19500 / 16 = 1219
BEP in dollars = fixed costs / CMR = 19500 / 40% = 48750
c. Margin of safety in dollars = Actual (expected sales) – break-even sales = (2500 * 40) – 48750 =
51250
Margin of safety in ratio = margin of safety in dollars / actual (expected sales) = 51250 /
(2500*40) * 100 = 51250 / 100000 * 100 = 51.25%
d. Total dollar contribution margin = 16 * 2500 = 40000
Increase sales if contribution margin increases by 30% = 40000 * 30% = 12000
P22.3A
a.
b. Contribution margin per unit = sales – variable cost = 0.5 – (1260000/3600000) = 0.5 – 0.35 =
0.15
Contribution margin per unit = contribution margin / total quantities of the product =
540000/3600000 = 0.15
Contribution margin ratio = CMP unit / sales * 100 = 0.15 / 0.5 * 100 = 30
BEP in unit = fixed costs / CMP = 405000 / 0.15 = 2700000
BEP in dollars = fixed costs / CMR = 405000 / 30% = 1350000
c. Margin of safety in dollars = Actual (expected sales) – break-even sales = 1800000 – 1350000 =
450000
Margin of safety ratio = MoS ($) / Actual (expected sales) = 450000 / 1800000 * 100 = 25
d. Required sales in dollars = (fixed costs + targeted net income) / CMR = (405000 + 180000) / 30
= 1950000
