Question 2 Cost Volume Profit Analysis

Flashy Phones manufactures and sells smartphones. They only make one model of phone called the X200-Z. Data relating to this product for 2020 is below:

Selling price per unit	$1,200
Variable manufacturing costs per unit	$720
Variable marketing and distribution costs per unit	$200
Fixed manufacturing costs per year	$540,000
Fixed non-manufacturing costs per year	$300,000

Required:

1. Explain the difference between fixed and variable costs using the smartphone as an example.

(4 marks)

2. Calculate the total variable costs. (1 mark)

3. Calculate the contribution margin per unit. (1 mark)

4. Calculate the total fixed costs. (1 mark)

5. Calculate the break-even point in units (Phones). (2 marks)

6. Calculate the break-even point for in sales dollars. (2 marks)

7. Calculate the margin of safety if budgeted sales are $3,900,000. (2 marks)

8. How many units of the X200-Z would Pear need to sell to earn a target profit of $130,000? (2 marks)

Please help with the above questions

Below is one example question with solutions just like the above one:

Question 2 Cost Volume Profit Analysis 15 marks Bean Counter Ltd manufactures and sells Accounting textbooks. Price and cost data for Bean Counter Ltd are as follows: Selling price per unit $40 Variable costs per unit: Direct materials $8.50 Direct labour $6.20 Manufacturing overhead $4.80 Selling costs $2.50 Annual fixed costs: Manufacturing overhead Selling and administrative $245,000 $115,000 Forecast annual sales (26,000 units) $1,040,000 Contribution Margin Selling Price Per Unit minus (Per Unit) Variable Costs Per Unit Budgeted Sales Revenue Margin of Safety Minus Break-Even Point in Sales Dollars Break-Even Point in Fixed Costs Units Contribution Margin Per Unit Break-Even Point Break-Even Point in Units in Sales Dollars Selling Price Per Unit Target Sales Volume Fixed Costs + Target Net Profit in Units Contribution Margin Per Unit (1 mark) Required: Calculate Bean Counter Ltd's: 1. Total variable cost per unit. Total variable cost per unit = $8.5 +6.2 + 4.8 +2.5 - $22.00 2. Total annual fixed costs. Total annual fixed costs = 245,000 + 115,000 = $360,000 3. Contribution margin per unit. CM per unit = selling price per unit - variable costs per unit = $40 - $22 = $18 (1 mark) (1 mark) (2 marks) (2 marks) 4. Break-even point in units. Break-even point in units = Fixed costs CM per unit = 360.000 18 = 20,000 units 5. Break-even sales dollars. = Break-even units x selling price per unit = 20,000 x $40 = $800,000 6. Safety marginin dollars. budgeted sales revenue- break-even sales dollars = $1,040,000 - $800,000 =$240,000 (2 marks) (2 marks) 7. Unit sales needed to achieve a target profit of $72,000. = Fixed costs + Target profit CM per unit 360.000 + 72.000 = 24,000 units 18 Page 5 of 8. Unit sales needed to achieve a target profit of $72,000 if the direct materials cost decreases to $6.50 per unit. (4 marks) New variable costs per unit = $6.5 +6.2 + 4.8 +2.5 = $20.00 New CM per unit = $40 - $20 = $20 Unit sales to earn target profit Fixed costs + Target profit CM per unit 360.000 + 72.000 20 = 21,600 units