Cost-Volume-Profit Analysis Problems

The following cost information is available for a single product manufactured and sold by Dreamer Corp.:

Variable Costs: _____________ (Per unit)	Direct materials	$10.00	Fixed costs (in total)
	Direct labor	$12.00	Fixed overhead	$540,000
	Variable overhead	$3.00	Fixed Selling	$360,000
	Variable selling	$2.00

1. Determine the contribution margin per unit and the contribution margin ratio (percentage).

2. Calculate the firms breakeven point in units.

3. Calculate the firms breakeven point in sales dollars (revenues).

4. Calculate income at their current operating level of 120,000 units.

5. Suppose a change in manufacturing technology would allow the firm to reduce direct labor costs to $6 per unit, but would increase fixed overhead costs by $150,000. Compute the breakeven point (in units) considering these changes to the cost structure.

6. Return to the original information (ignore changes in part 5). Suppose the firm can add a second product that would sell for $20 per unit, have unit variable costs of $13, and would increase total fixed costs by $320,000. Determine the firms total income if they continue making and selling 120,000 units of the original product and make and sell 80,000 units of the second product.

7. Continuing with the 2 products, suppose the sales mix changes so they make and sell 100,000 units of each product (making the same total of 200,000 units). Determine the firms total income with this mix of the two products.