2. Cost Volume Profit Analysis or Break Even Analysis

You are given the financial information below:

Toms Treasures Income Statement . . .For Year Ended 12/31/17

Sales (85,000 units) . . ... . . .$5,500,000

Variable Expenses . . . . . . .$2,475,000

Contribution Margin . . . . . . . $3,025,000

Fixed Expenses. . . . . . . . . .$1,785.000

Net Operating Income . . . . . . $1,240,000

Additional Formulas Needed:

1. Sales Variable expenses = Contribution Margin

2. B/E Units = Fixed Costs / CM per unit

3. B/E $ = B/E Units x Sales price per unit

4. B/E $ = Fixed Costs / CM ratio

5. Safety Margin = Budgeted sales Breakeven sales

6. Sales Total Variable Cost Total Fixed Cost = Profit (Income)

7. Sales Variable Cost = CM; CM Fixed Costs = Profit (Income)

8. Sales (units) = Fixed Costs+ target net profit / CM/unit

Calculate the following:

A) Compute the Income Statement on a per unit basis and as a percent of sales and provide

that information in two columns to the right of the total dollar information provided.

B) Calculate the sales price per unit and the variable expenses per unit

C) Compute the companys contribution margin ratio.

D) Compute the companys break-even point in units.

E) Compute the companys break-even point in dollars.

E) Calculate the companys margin of safety in dollars.

F) Assume that next year, management wants to earn a profit of $2,000,000. How many units

must be sold to reach this target profit?