Problems All applicable Problems are available with McGraw-Hill's Connect Accounting, connect |ACCOUNTING Problem 7-34 Basic CVP Relationships; Disk City, Inc. is a retailer for digital video disks. The projected operating income for the current year is Retaller $200,000 based on a sales volume of 200,000 video disks. Disk City has been selling the disks for $16 (LO 1, 2, 4) each. The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk. Disk City's annual fixed costs are $600,000. 2. Operating income: Management is planning for the coming year, when it expects that the unit purchase price of the $280,000 video disks will increase 30 percent. Required: J. Calculate Disk city's break-even point for the current year in number of video disks. 2 What will be the company's operating income for the current year if there is a 10 percent increase in projected unit sales volume? What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same. operating income as projected for the current year if the unit selling price remains at $16? . In order to cover a 30 percent increase in the disk's purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Disk City establish for the coming year? Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1), (2), and (3) above. Show how the solution will change if the following information changes:. the selling price is $17 and the annual fixed costs are $640,000. (CMA adapted)Chapter 7 Cost-Volume-Profit Analysis 345 CollegePak Company produced and sold 50,000 backpacks during the year just ended at an average Problem 7-35 price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were Basic CVP Computations $2 per unit sold. Fixed costs amounted to $180,000 for manufacturing and $72,000 for marketing, There (LO 1, 2, 4) was no year-end work-in-process inventory. 2. Sales units required for Required: $180,000 income: 43,200 units 1. Compute CollegePak's break-even point in sales dollars for the year. 2. Compute the number of sales units required to earn operating income of $180,000 during the year. 3. CollegePak's variable manufacturing costs are expected to increase by 10 percent in the coming year. Compute the firm's break-even point in sales dollars for the coming year. If CollegePak's variable manufacturing costs do increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year,Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for pro- ducing its sole product, the universal gismo. Data relevant to the systems follow. Problem 7-36 CVP Relationships; Model no. 6754: Indifference Point (LO 1, 4) Variable costs, $16.00 per unit Annual fixed costs, $985,600 2. Operating income. model no. 4399: $1.094,400 Model no. 4399: Variable costs, $12.80 per unit Annual fixed costs, $1,113,600 Corrigan's selling price is $64 per unit for the universal gismo, which is subject to a 5 percent sales commission. Required: How many units must the company sell to break even if Model 6754 is selected? Ni Which of the two systems would be more profitable if sales and production are expected to average 46,000 units per year? . Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $450,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $956,400 of operating income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 46,000 units per year. 4. Ignoring the information presented in requirement (3), at what volume level will management be indifferent between the acquisition of Model no. 6754 and Model no. 4399? In other words, at what volume level will the annual total cost of each system be equal? (Hint: At any given sales volume, sales commissions will be the same amount regardless of which model is selected.)