r1 (Q) 7 CVP 1. AB Company sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and xed expenses do not change= then: (a) How would contribution margin per unit change? (b) How would contribution margin ratio change? (c) How would break-even in units change? 2. On January 1= BD Corporation increased its management salaries. All other costs and revenues were unchanged. (a) How did this increase affect wsbreak-even point? (b) How this increase affect the company's break-even point? 3. S Company's break-even point in sales is $900.000= and its variable expenses are 75% of sales. If the company lost $32.000 last year= what is the sales amount? 4. J Company has a margin of safety percentage of 20%. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information= what is the net operating income? 5. SI Company's single product has a selling price of $25 per unit. Last year the company reported a prot of $20.000 and variable expenses totaling $180.000. The product has a 40% contribution margin ratio. Because of competition. EB Company will be forced in the current year to reduce its selling price by $5.00 per unit. How many units must be sold in the current year to earn the same prot as was earned last year? 6. AR Company= a manufacturer of lamps= budgeted sales of 400.000 lamps at $20.00 per unit for next year. Variable manufactming costs were budgeted at $8.00 per unit= and fixed manufactruing costs at $5.00 per unit. A special order offering to buy 40.000 lamps for $11.50 each was received by AR a few months into the year. AR has sufcient capacity to ll the special order: however= the production would have to be done by the present work force on an overtime basis at an estimated additional cost of $1.50 per lamp. AR will not incur any selling expenses as a result of the special order and the special order would not affect any of the company's normal sales. What would be the effect on net operating income if the special order is accepted? Hamster Sports Company specializes in retailing badminton racket which sell for RM 100 per unit. Heavy dependence on labor has the variable costs standing at RM 60 per racket. During March 2005 the company sold 650 units of racket with the following result: RM Sales 65.000 Less: Variable Costs 35.750 Contribution Margin 29,250 Less: Fixed Costs 10.000 Net Operating Income 19.250 Required: a) Calculate the break-even point in units and RM for the company (4 marks) b} What is the margin of safety for the company in units and percentage? c) Due to increase in labor rates= there will be an increase of RM 15 per racket for April. If other costs remain intact how many rackets should be sold to achieve the same net operating income as in March? (1} The company is considering automation. This will slash variable costs by 50%= but it would cause the xed costs to increase to RM 35.000 per month. Assuming the company goes ahead with the automation= what would be the company's new break even point in units? Should the company go ahead with the automation? Why? [ T his question is not related to part c)] e) Based on question (d)= the automation enables company to produce squash racket selling at RM 185 per unit with variable cost of RM 100 per racket. Assume that xed costs remains RM 35,000 per month, nd the break-even in RM for the company as a whole. 1) Give 3 assumptions in cost volume prot analysis