NALYSIS AND C Feedback K-EVEN AND.GR V Check My Work Rework the formula frenthe oortribution margin reme statement to solve for Fixed Costs Fixed Costs Sales-Variable Costs . Operating Income CVP and the Break-Even Point Review the following concepts about cVP analysis and break-even point and then complete the related statements. Concept t is important to understand contribubion margin because it is used bo determine the breen to determine the break-even point At the break-even point. which can help predict the success of a new venture or product. The CVP formula can be used operating income is At the break-even point Contribution margin is the amount available to cover fixed coats. The CVP formula can b restaedcontribution margin is al to Ficed costs to refiect this Managers analyze how changes in costs and seling prices will affect contribution margn and therefore, the breakc even point An nre in seling price ora cac n vanable coats wil cause contribution margin to increase providing more than anough to cover fiwed coate When contribution margin increases, tha break-even When contribution margin decreases the bceaic even Likewise, if selling price decresses or vanable costs incraase contmbution margin will cecrease and be less than fired costs f fivea coats increaza tha Check Wy Wark MP CVP ANALYSIS AND C MP BREAK-EVEN AND GR AP TARGET INCOME AND MP CVP ANALYSIS-OVERV The break even point can be expressed in terms of sales dolars or namber of units. The break-even units tells us how many units must be sold so that operating income is $o. Assume that you are part of the accounting toam for trunk Harcware. The company currently expects to sell 964 units for total reven of $21,100 each month. Stbunk Hardware estimates direct matarials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $z.100, and vanable selling and administrative costs of $1.050. Fixed costs of $6,500 are also expected, which includes foxed overhead and seling and administrative costs. Using this information complete the contnbution margin income statement shown below Strunk Haedware ncome Statement Less: Varisble csts Less Fxed costs Operating income the fest two steps above and apply these valss Review the formlia anid structure of this saement o Recal that diract labor and diedt materiala are included wth variable costs faur recommendation is to first determine the break-aven point in units. First, calculate the contrbution margin (CMI per unit (rounded to the nearest Strunk Hardwere s xamining cost behavior patterns. Y dallar). Nect, complete the formula below to determine the breal-awen units Total Fixed Cests Contribution Margin per Unit Units units Net Chack My Work gress: 14 itens Strunk dollar). Next, complete the formula below to determine the break even units. Total Fixed Costs/Contribution Margin per Unit Units P CVPANALYSIS AND C MP BREAK-EVEN AND GR PTARGET INCOME AND PCVPANALYSIS-OVERVI Feedback Chex My Work Use the information from the prior stop to calclale these values The contribuion margin per unit is simply the contribution margin from the stabement above Svided by the number of units adld APPLY THE CONCEPTS: The Profit-Volume Graph ) A pro tvolume graph helps managers to visua re the relationship bet veen pro t and nits sold Tha dala le, S urk Ha d are ha endte preek el et ehk a een uted te (diamond symbols plot the pro t The operating los, is the shaded area bordered by the ports (cros imbole The ope strg D o fit ste ru o u dod by the gran alta ian .vs Choose the cornect profit volume graph for Strunk Hardware A V PROFIT Dolls as Oper Less Ae 7500 5000 2500 BREAK-EVEN AND GR Oper, Loss Area TARGET INCOME AND. Profit Line CVPANALYSIS-OVERVI 2500 -5000 7500 10000 0200400 600 8001000 UNITS OF SALES A. PROFIT Dollars Oper Profit Area 10000 Oper Loss Area 5000 2500 Proht Line 2500 7500 10030 230400630 801000 PCVPANALYSIS AND C P BREAK-EVEN AND GR PTARGETINCOME AND P CVPANALYSIS OVERVM Look er chartat refects the breakeven point you computed in the dep above faure out the "Y interopt value (whare X-0), look back at the Contrstuion Margn Income Stutement in the prior sep ard fiqgure out what operating ineome would be ifaet sato and APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fioxed Costs Now consider each of the followwing scenanos for Strunk Hardware. Calculate the contribution unit. for each scenario separately. Scenario 1 s margin (CM) par unit, rounded to nearest delar, and the new bresi-even point in units, rounded to the nearest wbale Scenario 2 Scenario 3 After some extensive market research, Strunk has Strunk has been axperiencing quality problems witha datermined that a sales price increase of $2 per unt materials supplier Changing suppliers will improve the machine in the factory. The will not affect the sales volume and will be effective quality of the product but will cause direct materials costs to depreciation on that equipment Strunk will dapose of a increase by $1 per unit. s $500 per month CM per unit CM per unit: CM per unt ersaik-even unitsunts te for the Next Check My Work ress:14 items NALYSIS AND C Feedback K-EVEN AND.GR V Check My Work Rework the formula frenthe oortribution margin reme statement to solve for Fixed Costs Fixed Costs Sales-Variable Costs . Operating Income CVP and the Break-Even Point Review the following concepts about cVP analysis and break-even point and then complete the related statements. Concept t is important to understand contribubion margin because it is used bo determine the breen to determine the break-even point At the break-even point. which can help predict the success of a new venture or product. The CVP formula can be used operating income is At the break-even point Contribution margin is the amount available to cover fixed coats. The CVP formula can b restaedcontribution margin is al to Ficed costs to refiect this Managers analyze how changes in costs and seling prices will affect contribution margn and therefore, the breakc even point An nre in seling price ora cac n vanable coats wil cause contribution margin to increase providing more than anough to cover fiwed coate When contribution margin increases, tha break-even When contribution margin decreases the bceaic even Likewise, if selling price decresses or vanable costs incraase contmbution margin will cecrease and be less than fired costs f fivea coats increaza tha Check Wy Wark MP CVP ANALYSIS AND C MP BREAK-EVEN AND GR AP TARGET INCOME AND MP CVP ANALYSIS-OVERV The break even point can be expressed in terms of sales dolars or namber of units. The break-even units tells us how many units must be sold so that operating income is $o. Assume that you are part of the accounting toam for trunk Harcware. The company currently expects to sell 964 units for total reven of $21,100 each month. Stbunk Hardware estimates direct matarials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $z.100, and vanable selling and administrative costs of $1.050. Fixed costs of $6,500 are also expected, which includes foxed overhead and seling and administrative costs. Using this information complete the contnbution margin income statement shown below Strunk Haedware ncome Statement Less: Varisble csts Less Fxed costs Operating income the fest two steps above and apply these valss Review the formlia anid structure of this saement o Recal that diract labor and diedt materiala are included wth variable costs faur recommendation is to first determine the break-aven point in units. First, calculate the contrbution margin (CMI per unit (rounded to the nearest Strunk Hardwere s xamining cost behavior patterns. Y dallar). Nect, complete the formula below to determine the breal-awen units Total Fixed Cests Contribution Margin per Unit Units units Net Chack My Work gress: 14 itens Strunk dollar). Next, complete the formula below to determine the break even units. Total Fixed Costs/Contribution Margin per Unit Units P CVPANALYSIS AND C MP BREAK-EVEN AND GR PTARGET INCOME AND PCVPANALYSIS-OVERVI Feedback Chex My Work Use the information from the prior stop to calclale these values The contribuion margin per unit is simply the contribution margin from the stabement above Svided by the number of units adld APPLY THE CONCEPTS: The Profit-Volume Graph ) A pro tvolume graph helps managers to visua re the relationship bet veen pro t and nits sold Tha dala le, S urk Ha d are ha endte preek el et ehk a een uted te (diamond symbols plot the pro t The operating los, is the shaded area bordered by the ports (cros imbole The ope strg D o fit ste ru o u dod by the gran alta ian .vs Choose the cornect profit volume graph for Strunk Hardware A V PROFIT Dolls as Oper Less Ae 7500 5000 2500 BREAK-EVEN AND GR Oper, Loss Area TARGET INCOME AND. Profit Line CVPANALYSIS-OVERVI 2500 -5000 7500 10000 0200400 600 8001000 UNITS OF SALES A. PROFIT Dollars Oper Profit Area 10000 Oper Loss Area 5000 2500 Proht Line 2500 7500 10030 230400630 801000 PCVPANALYSIS AND C P BREAK-EVEN AND GR PTARGETINCOME AND P CVPANALYSIS OVERVM Look er chartat refects the breakeven point you computed in the dep above faure out the "Y interopt value (whare X-0), look back at the Contrstuion Margn Income Stutement in the prior sep ard fiqgure out what operating ineome would be ifaet sato and APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fioxed Costs Now consider each of the followwing scenanos for Strunk Hardware. Calculate the contribution unit. for each scenario separately. Scenario 1 s margin (CM) par unit, rounded to nearest delar, and the new bresi-even point in units, rounded to the nearest wbale Scenario 2 Scenario 3 After some extensive market research, Strunk has Strunk has been axperiencing quality problems witha datermined that a sales price increase of $2 per unt materials supplier Changing suppliers will improve the machine in the factory. The will not affect the sales volume and will be effective quality of the product but will cause direct materials costs to depreciation on that equipment Strunk will dapose of a increase by $1 per unit. s $500 per month CM per unit CM per unit: CM per unt ersaik-even unitsunts te for the Next Check My Work ress:14 items