2. Cost-Volume-Profit (CVP) Relationships

Bilco Fabrication manufactures one product, a low-cost car battery. Cost analysis by the accounting department has determined that the variable cost per unit is $12. Bilcos fixed costs amount to $792,480 annually. The company is projecting data based on a sales price of $20. Use the above data to answer the following:

1. What is the contribution margin of Bilcos battery, stated both as (a) a per-unit dollar amount, and (b) a percentage.

a. ______________ b. _______________

2. Calculate Bilcos break-even point in number of units.

3. Figure the level of sales that Bilco would have to achieve to reach a target income of $150,000. Indicate your answer in dollars of sales.

4. What would Bilcos net income be if the company was able to achieve sales of 125,000 batteries?

5. What is Bilcos Degree of operating leverage at 125,000 batteries? If sales were to increase by 8%, how much would Net Income increase by (b-% c-$)?

a. _______________ b. _________________ c. _________________

6. Indicate the companys margin of safety at a projected level of sales of 125,000 units sold, stated in (a) dollars of sales, and (b) as a percentage of sales and (c) units.

a. _______________ b. _________________ c. _________________