Cost-Volume-Profit Problems

Problem 1

Step 1: Follow the formula: Break Even Sales in Dollars = Fixed Costs in Dollars + Variable Costs as a % of Break Even Sales

Step 2: Analyze the following: S = $90,000 + 60% of Sales

Step 3. Solve Step 2 (Remember to set something equal to 0)

Using the same series of steps applied in Problem 1 and assuming the desired amount of Target Income is $40,000, solve for Break Even in Sales

• Sales = Fixed Costs ($) + Variable Costs (% of BE Sales) + Target Income
• S = 90,000 + 60% + 40,000
• Solve.

Whats the Margin of Safety if sales volume is $250,000 and BE in Sales is $200,000?

Whats the Contribution Margin Ration if sales volume is $250,000 and variable expenses are $175,000?