Question
1. Using CVP analysis to find breakeven points and target profit volumes Mimi Incorporated has a targeted operating income of $518,000 for the upcoming year.
1. Using CVP analysis to find breakeven points and target profit volumes
Mimi Incorporated has a targeted operating income of $518,000 for the upcoming year. The selling price of its single product is $40.50 each, while the variable cost per unit is $12.50. Fixed costs total $182,000.
Calculate the following:
a.Contribution margin per unit
b.Breakeven point in units
c.Units to be sold to earn the targeted operating income
2. Factoring resource constraints into product mix decisions
Rose Incorporated manufactures two types of vases, small and large. The following per-unit data are available.
Small VaseLarge Vase
Sale price$60$100
Variable costs $35$60
Machine hours required for 1 vase12
Total fixed costs are $600,000, and Rose Incorporated can sell a maximum of 25,000 units of each type of vase annually. Machine hour capacity is 50,000 hours per year.
a.Determine the contribution margin per unit for each type of vase.
b.Determine the contribution margin per machine hour for each type of vase.
c.Determine the number of units of each style of vase that Rose Incorporated should produce to maximize operating income.
d.What is the dollar amount of the maximum operating income as calculated in C above?
3. Deciding whether to discontinue a product, department, or store
The income statement for Germain Appliances is divided by its two product lines, Toasters and Microwaves, as follows:
Toaster Microwave Total
Sales Revenue $620,000 $255,000 $875,000
Variable expenses $440,000 $210,000 $650,000
Contribution margin $180,000 $45,000 $225,000
Fixed expenses $75,000 $75,000 $150,000
Operating Income (loss) $105,000 $(30,000) $75,000
If Germain Appliances can eliminate fixed costs of $34,000 and increase the sale of Toasters by 6300 units at a selling price of $30 per unit and a contribution margin of $12 per unit, then discontinuing the Microwaves should result in what difference in total operating income?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started