1)Craigco has a relevant range between $100,000 and $750,000 in sales. Its 2019 results are as follows:

Craigco

Contribution Margin Income Statement

Dec. 31, 2019

Sales Revenue 450,000

Less: Variable Expenses 202,500

Contribution Margin 247,500

Less Fixed Expenses 180,000

Operating Income 67,500

1. Prepare contribution margin income statements at sales levels of $200,000 and $550,000.

Ans: Sales revenue 200,000 550000

Less-Variable Expenses 90,000 247500

Contribution Margin 110000 302500

Less:Fixed Expense 180000 180000

Operating Income (70,000) 122500

Variable expense=202500/450000*200,000=90,000

Variable expense=202500/450000*550000=247500

2. Compute Break-even sales in dollars

Ans:Break -even sales in dollars=Fixed costs/Contribution margin ratio

Contribution margin ratio=Contribution margin/sales=247500/450000=0.55

Break-even sales in dollars= 1,80000/0.55=327272.72

3. What is Craigcos margin of safety as a percent of sales?

Ans:Margin of safety as a percent of sales: (Sales level-Break even point)/Sales level*100=(450000-327272.72)/450000*100=27.27%

4. What is Craigcos margin of safety in dollars?

Ans: Margin of safety in dollars=450000-327272.72=122727.28

5. Assuming each unit sells for $45 what is Craigcos margin of safety in units?

6. What is operating leverage factor at $450,000 in sales?

7. By what percent will Craigcos operating income fall if sales go down by 10%?

3) ABC Corporation has fixed expenses of $185,000. Each product they sell sells for $18.

a) Assuming variable costs are $12 use the income statement equation approach to find the break-even sales in units.

b) Assuming variable costs are $10 use the contribution margin shortcut approach to find the # of units ABC Corporation needs to sell to obtain an operating profit of $75,000.

c) Assuming a contribution margin % of 37.5% compute ABC Corporations operating profit if they sell 32,500 units.

1. Assuming a contribution margin of 55% use contribution margin ratio shortcut to calculate the break-even point in dollars.

2. Assuming variable costs of $10 a unit, prepare a CVP graph. Label the axes, sales revenue line, fixed expense line, total expense operating loss area, operating income area, and the break even point for the relevant range of 0 to 50,000 units.

3. What is the Y co-ordinate if sales are 35,000? Label this point on the sales revenue line, fixed expense line and total expense line.

4) DEF Corporation sells two products, Product A has a sales price of $35 and variable costs of $21.50 while Product B has a sales price of $55 and variable costs of $37.5. DEF Corporation has fixed costs of $150,000.

a) Assuming a sales mix of 5 units sold of Product A for every 3 units sold of Product B, calculate how many units of each product need to be sold to achieve a profit of $50,000.

b) Assuming a sales mix of 3 units sold of Product A for every 5 units sold of Product B, calculate how many units of product need to be sold achieve a profit of $50,000.

5) Craigco currently has a contribution margin ratio of 35% and its current breakeven point is $450,000 in revenue.

a)What is Craigcos break-even point in sales dollars if fixed costs increase by 15%?

b) What is Craigcos break-even point in sales dollars if fixed costs decrease by 15%?

c) What is Craigcos break-even point in sales dollars if variable costs per unit decrease by 15%?

d) What is Craigcos break-even point in sales dollars if variable costs per unit increase by 15%?

6) BC Logging corporation sells chips and logs to mills around BC. Every load of chips they sell has a selling price of $1500 and variable costs of $1150. Every load of logs they sell has a selling price of $800 and variable costs of $500. They sell 6 loads of logs for every 3 loads of chips. Fixed costs are $450,000.

a) If BC logging corporation delivers 2,000 total loads what is their operating income/loss?

b) Create a contribution margin income statement for your answer in question A)

c) What is BG Logging corporations contribution margin ratio?

d) What is BC Logging corporations break even point in sales dollars? What is it in total loads?

e) BC Logging Corporation is interested in harvesting from a site that is out of their normal operating area. The extra distance each load is driven will increase variable costs by $30 per load. It will cost BC Logging corporation $130,000 to buy the rights to harvest the site. Harvesting from this site will increase BC Logging Corporations total loads sold by 500. What effect would harvesting from the site have on BC Logging Corporations Operating Income? Should they do it?

7) 123 Corporation sells two products Product A and product B which sell in a 3:2 ratio. Product A has a variable cost of $65 per unit and sells for $70. 123 Corporation has fixed expenses of $140,000. When 123 corporations sells 25,000 units they have an operating income of $20,000.

a) What is the contribution margin on Product B?

ANS: CONTRIBUTION MARGIN OF B WOULD BE=

b) Assuming variables costs of $80, what is the sales price of product B?

Ans:

c) Prepare a contribution margin income statement for 123 corporation.

8) Craigco had an operating leverage factor of 1.35 when sales were $120,000. Its contribution margin ratio was 45%. Calculate their fixed expenses.