H8 5 Unit 2 Cost Volume Profit 6 Read Chapter 18 Problem 3 Frost Fire Company is analyzing two alternative methods of manufacturing is custom snowboards. The Managerial Accountant has performed an analysis that indicates that variable costs can be reduced 40% by installing a machine that would automate production, but fixed costs would increase to $675,000. Analysis 1 shows costs before installing the machine; Analysis 2 shows costs after the machine is installed. If Analysis 2 is selected, Management would like to reduce the sales prices by half the savings of the variable costs to be more competitive in the market place. For both options: 1 Calculate the contribution margin 2 Calculate the contribution margin ratio 3 Calculate the break even in units and in sales $ Prepare a CVP Income Statement, assme that Frost Fire's projects sales of 7,500 units 5 Recommend which alternative Frost Fire should choose 8 Analysis 2 BNB Na 3 = Variable Fixed Selling Income Analysis 1 $125 $475,000 $350 25% $550.000 $350 25% Analysis 1 Per Unit Units Sales Variable Costs Contribution margin Contribution Margin Ratio CMisales Break Even in Units Resources Problem 1 Problem 2 Problem 3 Problem Clipboard Alignment 1 x for Per Unit 8 Units Sales Variable Costs Contribution margin Contribution Margin Ratio CMisales Break Even in Units Fixed Costs 31 tion Margin per unit 8 8 Break even in Sales Fixed Costs 35 ibution Margin ratio 8 Analysis 2 Per Unit Units Sales Variable Costs Contribution margin a Contribution Margin Ratio CM'sales sa Break Even in Units Fixed Costs Contribution Margin per unit 4 2 Break even in Sales Fred Cost Resources problem Problem Problem 3 Problem 4 Format Painter Clipboard Font Alignmer H8 x & fx FG Analysis 2 88 Per Unit Units Sales Variable Costs Contribution margin Contribution Margin Ratio CMisales Break Even in Units Fined Costs Contribution Margin per unit Break even in Sales Fixed Costs Contribution Margin ratio 32289898988 289 88 CVP Income Stmt Total # Units 7,500 Sales S Variable costs $ Contribution Margin $I Fixed Costs $ Net income $ CVP Income Stmt Resources Problem Problem 3 Problem 4 Clipboard Font Alignmen X F G Break even in Sales Fixed Costs Contribution Margin ratio CVP Income Stmt Total # Units 7,500 Sales $ Variable Costs $ Contribution Margin $ Fixed Costs $ Net income $ 00 CVP Income Stmt Total #Units 7,500 Sales $ Variable Costs $ Contribution Margin $ Fixed Costs $ Net income $ 5 Recommendation Problema Problem 3