Cost-Volume Profit Analysis Assignment

Executive Desk Company (EDC) and Doors Company have approached you to conduct cost-volume profit analyses for their businesses.

Question 1

Because of EDC's massive expansion plan, their fixed costs are expected to skyrocket in the next year due to hiring, long-term asset purchases, and so on. The plant manager expects fixed costs to increase to $900,000. They sell desks for $800, and the variable costs for each are $450. Based on this information, your manager asks you to determine the following amounts:

1. the break-even point in units,
2. the break-even point in sales dollars, and
3. the number of units needed to be sold for a profit of $200,000.

Question 2

After the year is completed, EDC has sold 5,500 units. Your manager has asked you to compute the following information:

1. margin of safety in units,
2. margin of safety in dollars, and
3. margin of safety in percentage.

Question 3

Doors Company sells two types of exterior doors. The first one is a basic door, for which variable costs are $150 and which sells for $250. The second type is hurricane safe, to be sold to customers living on the coasts; its variable costs are $300, and it sells for $500. The company has total fixed costs of $2,000,000. The sales mix for the company is three basic doors to one hurricane-safe door. Your manager would like to know how many of each of the product the company must sell to break even. Choose an appropriate graphing strategy from this lesson (Lesson 3) to visually represent your findings, and include the graph(s) with your calculations. See the Canvas lesson for an example of line graphs used for this purpose.