Chapter 5: Cost-Volume-Profit and Chapter 6: CVP Analysis Additional Issues
ACC 560 Week 4 Chapter 5: Exercises 6, 9, and 13; Problem 2; Chapter 6: Exercises 2, 7, and 12;
PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.
A. Identify the above costs as variable, fixed, or mixed.
B. Calculate the expected costs when production is 5,000 units.
The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.
Salaries $5,900 per month FIXED COST
Utilities $1,100 per month FIXED COST
Depreciation $1,000 per month FIXED COST
Maintenance $100 per month FIXED COST
Maid service $14 per room VARIABLE
Other costs $28 per room VARIABLE
Instructions: Determine the inn’s break-even point in
(a) number of rented rooms per month and
Billings Company has the following information available for September 2017.
Unit selling price of video game consoles $ 400
Unit variable costs $ 280
Total fixed costs $54,000
Units sold 600
A. Compute the unit contribution margin.
B. Prepare a CVP income statement that shows both total and per unit amounts.
C. Compute Billings’ break-even point in units.
D. Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.
In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales.
A. Determine the contribution margin in dollars, per unit and as a ratio.
B. Using the contribution margin technique, compute the break-even point in dollars and in units.
C. Compute the margin of safety in dollars and as a ratio.
PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 40% contribution margin ratio. The company’s fixed costs are $15,600,000 (that is, $78,000 per service outlet).
A. Calculate the dollar amount of each type of service that the company must provide in order
B. The company has a desired net income of $52,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet?
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below.
D E F
Selling price $200 $300 $250
Direct labor costs 30 80 35
Other variable costs 95 80 145
The company has 2,000 hours of labor available to build inventory in anticipation of the company’s peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $10.
A. Determine the number of direct labor hours per unit.
B. Determine the contribution margin per direct labor hour.
C. Determine which product should be produced and the total contribution margin for that product.
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