Question
32. CVP and Sensitivity Analysis (Single Product). Madera Company has annual fixed costs totaling $120,000 and variable costs of $3 per unit. Each unit of
32. CVP and Sensitivity Analysis (Single Product). Madera Company has annual fixed costs totaling $120,000 and variable costs of $3 per unit. Each unit of product is sold for $15. Madera expects to sell 12,000 units this year (this is the base case).
Required:
1. break-even point in units.
2. How many units must be sold to earn an annual profit of $50,000? (Round to the nearest unit.)
3. break-even point in sales dollars.
4. What amount of sales dollars is required to earn an annual profit of $70,000?
5. the margin of safety in units and in sales dollars.
6. Prepare a contribution margin income statement for the base case.
7. What will the operating profit (loss) be if the sales price decreases 30 percent? (Assume total sales remains at 12,000 units, and round to the nearest cent where appropriate.)
8. Go back to the base case. What will the operating profit (loss) be if the variable cost per unit increases 10 percent? (Assume total sales remains at 12,000 units, and round to the nearest cent where appropriate.)
35. CVP Analysis and Cost Structure (Service Company).Conway Electrical Services provides services to two types of clients: residential and commercial. The company's contribution margin income statement for the year is shown (this is the base case). Fixed costs are known in total, but Conway does not allocate fixed costs to each department.
Required:
- break-even point in sales dollars.
- the margin of safety in sales dollars?
- What amount of sales dollars is required to earn an annual profit of $750,000?
- Refer to the base case shown previously. What would the operating profit be if the Commercial variable costs are 20 percent higher than originally anticipated? How does this increase in Commercial variable costs impact the operating leverage of the company?
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