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CHAPTER 5

Cost-Volume-Profit

ASSIGNMENT CLASSIFICATION TABLE

Learning Objectives QuestionsBrief

Exercises Do It! ExercisesA

ProblemsB

Problems

1. Distinguish between variable and fixed costs.

1, 2, 3, 6 1 1 1, 2, 3, 4, 5, 6

1A, 6A 1B, 6B

2. Explain the significance of the relevant range.

4, 5 2 2

3. Explain the concept of mixed costs.

6, 7, 8 1, 3, 4, 5 1, 2 1, 3, 4, 5, 6

1A 1B

4. List the five components of cost-volume-profit analysis.

9 7

5. Indicate what contribution margin is and how it can be expressed.

10, 11, 17 6, 7 8, 9, 10, 11, 12, 13, 17

1A, 2A, 3A, 4A, 5A, 6A

1B, 2B, 3B, 4B, 5B, 6B

6. Identify the three ways to determine the break-even point.

12, 13, 14 8, 9 3, 4 8, 9, 10, 11, 12, 13, 14, 16, 17

1A, 2A, 3A,4A, 5A

1B, 2B, 3B,4B, 5B

7. Give the formulas for determining sales required to earn target net income.

16 10, 12 4 14, 15, 17 2A, 5A, 6A 2B, 5B, 6B

8. Define margin of safety, and give the formulas for computing it.

15 11 4 16, 17 2A, 4A, 5A, 6A

2B, 4B, 5B, 6B

Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 5-1

ASSIGNMENT CHARACTERISTICS TABLE

ProblemNumber Description

DifficultyLevel

TimeAllotted (min.)

1A Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income.

Simple 20–30

2A Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income.

Moderate 30–40

3A Compute break-even point under alternative courses of action.

Simple 20–30

4A Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.

Moderate 20–30

5A Compute contribution margin, fixed costs, break-even point, sales for target net income, and margin of safety ratio.

Moderate 20–30

6A Determine contribution margin ratio, break-even point, and margin of safety.

Moderate 20–30

1B Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income.

Simple 20–30

2B Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income.

Moderate 30–40

3B Compute break-even point under alternative courses of action.

Simple 20–30

4B Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.

Moderate 20–30

5B Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.

Moderate 20–30

6B Determine contribution margin ratio, break-even point, and margin of safety.

Moderate 20–30

5-2 Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only)

Copyright ©

2012 John Wiley &

Sons, Inc. W

eygandt, Managerial A

ccounting, 6/e, Solutions M

anual (For Instructor U

se Only)

5-3

Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems

Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation

* 1. Distinguish between variable and fixed costs.

E5-4 Q5-1Q5-2Q5-3Q5-6

BE5-1E5-1E5-2DI5-1

E5-5 E5-3E5-6P5-1AP5-1B

P5-6AP5-6B

* 2. Explain the significance of therelevant range.

Q5-4Q5-5

E5-2 BE5-2

* 3. Explain the concept of mixed costs. E5-4E5-5

Q5-6Q5-7BE5-1

DI5-1E5-1

Q5-8BE5-4BE5-5

DI5-2E5-5E5-6

BE5-3E5-3P5-1A

P5-1B

* 4. List the five components of cost-volume-profit analysis.

E5-7 Q5-9

* 5. Indicate what contribution margin is and how it can be expressed.

Q5-10 Q5-11Q5-17BE5-6BE5-7E5-8E5-9

E5-10E5-11E5-12E5-13E5-17

BE5-6P5-1AP5-2AP5-1BP5-2B

P5-3AP5-3BP5-4AP5-5AP5-6AP5-4B

P5-5BP5-6B

* 6. Identify the three ways to determine the break-even point.

Q5-12Q5-14

Q5-13BE5-8BE5-9DI5-3DI5-4E5-8E5-9

E5-10E5-11E5-12E5-13E5-14E5-17

E5-16P5-1AP5-2AP5-1BP5-2B

P5-3AP5-4AP5-3BP5-4BP5-5AP5-5B

* 7. Give the formulas for determining sales required to earn target net income.

Q5-16BE5-10BE5-12DI5-4

E5-12E5-14E5-15E5-17

P5-2AP5-2B

P5-5AP5-6AP5-5BP5-6B

* 8. Define margin of safety, and give the formulas for computing it.

Q5-15BE5-11DI5-4

E5-17 E5-16P5-2AP5-2B

P5-5AP5-5B

P5-4AP5-6AP5-4B

P5-6B

Broadening Your Perspective BYP5-6 BYP5-4 BYP5-1BYP5-2

BYP5-5 BYP5-3BYP5-7BYP5-8

BL

OO

M’S

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ON

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ANSWERS TO QUESTIONS

1. (a) Cost behavior analysis is the study of how specific costs respond to changes in the level of activity within a company.

(b) Cost behavior analysis is important to management in planning business operations and in deciding between alternative courses of action.

2. (a) The activity index identifies the activity that causes changes in the behavior of costs. Once the index is determined, it is possible to classify the behavior of costs in response to changes in activity levels into three categories: variable, fixed, or mixed.

(b) Variable costs may be defined in total or on a per-unit basis. Variable costs in total vary directly and proportionately with changes in the activity level. Variable costs per unit remain the same at every level of activity.

3. Fixed costs remain the same in total regardless of changes in the activity level. In contrast, fixed costs per unit vary inversely with activity. As volume increases, fixed costs per unit decline and vice versa.

4. (a) The relevant range is the range of activity over which a company expects to operate during the year.

(b) Disagree. The behavior of both fixed and variable costs are linear only over a certain range of activity. CVP analysis is based on the assumption that both fixed and variable costs remain linear within the relevant range.

5. This is true. Most companies operate within the relevant range. Within this range, it is possible to establish a linear (straight-line) relationship for both variable and fixed costs. If a relevant range cannot be established, segregation of costs into fixed and variable becomes extremely difficult.

6. Apartment rent is fixed because the cost per month remains the same regardless of how much Adam uses the apartment. Rent on a Hertz rental truck is a mixed cost because the cost usually includes a per day charge (a fixed cost) plus an activity charge based on miles driven (a variable cost).

7. For CVP analysis, mixed costs must be classified into their fixed and variable elements. One approach to the classification of mixed costs is the high-low method.

8. Variable cost per unit is $1.30, or [($165,000 – $100,000) ÷ (90,000 – 40,000)]. At any level of activity, fixed costs are $48,000 per month [$165,000 – (90,000 X $1.30)].

9. No. Only two of the basic components of cost-volume-profit (CVP) analysis, unit selling prices and variable cost per unit, relate to unit data. The other components, volume, total fixed costs, and sales mix, are not based on per-unit amounts.

10. There is no truth in Faye’s statement. Contribution margin is sales less variable costs. It is the revenue that remains to cover fixed costs and to produce income (profit) for the company.

11. Contribution margin is $14 ($40 – $26). The contribution margin ratio is 35% ($14 ÷ $40).


Questions Chapter 5 (Continued)

12. Disagree. Knowledge of the break-even point is useful to management in deciding whether to introduce new product lines, change sales prices on established products, and enter new market areas.

13. $26,000 ÷ 25% = $104,000

14. (a) The break-even point involves the plotting of three lines over the full range of activity: the total revenue line, the total fixed cost line, and the total cost line. The break-even point is deter-mined at the intersection of the total revenue and total cost lines.

(b) The break-even point in units is obtained by drawing a vertical line from the break-even point to the horizontal axis. The break-even point in sales dollars is obtained by drawing a horizontal line from the break-even point to the vertical axis.

15. Margin of safety is the difference between actual or expected sales and sales at the break-even point. 1,250 X $12 = $15,000; $15,000 – $13,200 = $1,800; $1,800 ÷ $15,000 = 12%.

16. At break-even sales, the contribution margin is equal to the fixed costs. The contribution margin ratio is:$180,000$500,000 = 36%

The sales volume to achieve net income of $90,000 is as follows:$180,000+$90,000.36 = $750,000

17. PACE COMPANYCVP Income Statement

Sales.................................................................................................... $900,000Variable expenses

Cost of goods sold ($600,000 X .70)........................................... $420,000Operating expenses ($200,000 X .70)......................................... 140,000

Total variable expenses....................................................... 560,000Contribution margin............................................................................. $340,000


SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 5-1

Indirect labor is a variable cost because it increases in total directly and proportionately with the change in the activity level.

Supervisory salaries is a fixed cost because it remains the same in total regard-less of changes in the activity level.

Maintenance is a mixed cost because it increases in total but not proportionately with changes in the activity level.

BRIEF EXERCISE 5-2

VARIABLE COSTRelevant Range

FIXED COSTRelevant Range

$10,000 $10,000

8,000 8,000

6,000 6,000

4,000 4,000

2,000 2,000

0 20 40 60 80 100 0 20 40 60 80 100

Activity Level Activity Level


BRIEF EXERCISE 5-3

$60,000C

OS

T

Total Cost Line

45,000

30,000 Variable Cost Element

15,000

Fixed Cost Element

0 500 1,000 1,500 2,000 2,500

Direct Labor Hours

BRIEF EXERCISE 5-4

High Low Difference

$15,000 – $13,500 = $1,500 8,500 – 7,500 = 1,000

$1,500 ÷ 1,000 = $1.50—Variable cost per mile.

High Low

Total costLess: Variable costs

8,500 X $1.507,500 X $1.50

Total fixed costs

$15,000

12,750 $ 2,250

$13,500

11,250 $ 2,250

The mixed cost is $2,250 plus $1.50 per mile.


BRIEF EXERCISE 5-5

High Low Difference

$66,100 – $32,000 = $34,100 40,000 – 18,000 = 22,000

$34,100 ÷ 22,000 = $1.55 per unit.

Activity LevelHigh Low


40,000 X $1.5518,000 X $1.55

Total fixed costs

$66,100

62,000000,000$ 4,100

$32,000

27,900$ 4,100

BRIEF EXERCISE 5-6

1. (a) $288 = ($640 – $352)(b) 45% ($288 ÷ $640)

2. (c) $207 = ($300 – $93)(d) 31% ($93 ÷ $300)

3. (e) $1,300 = ($325 ÷ 25%)(f) $975 ($1,300 – $325)

BRIEF EXERCISE 5-7

RADIAL INC.CVP Income Statement

For the Quarter Ended March 31, 2014

Sales................................................................................... $2,400,000Variable costs ($920,000 + $70,000 + $86,000)................ 1,076,000Contribution margin.......................................................... 1,324,000Fixed costs ($440,000 + $45,000 + $98,000)..................... 583,000


Net income.......................................................................... $ 741,000

BRIEF EXERCISE 5-8

(a) $520Q – $286Q – $163,800 = $0$234Q = $163,800

Q = 700 units

(b) Contribution margin per unit $234, or ($520 – $286)X = $163,800 ÷ $234X = 700 units

BRIEF EXERCISE 5-9

Contribution margin ratio = [($300,000 – $180,000) ÷ $300,000] = 40%Required sales in dollars = $170,000 ÷ 40% = $425,000

BRIEF EXERCISE 5-10

If variable costs are 70% of sales, the contribution margin ratio is ($1 – $0.70) ÷ $1 = .30. Required sales in dollars = ($195,000 + $75,000) ÷ .30 = $900,000

BRIEF EXERCISE 5-11

Margin of safety = $1,000,000 – $840,000 = $160,000Margin of safety ratio = $160,000 ÷ $1,000,000 = 16%

BRIEF EXERCISE 5-12

Contribution margin per unit $1.60 is ($6.00 – $4.40)Required sales in units = ($480,000 + $1,500,000) ÷ $1.60 = 1,237,500.


SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 5-1

Variable costs: Indirect labor, direct labor, and direct materials.Fixed costs: Property taxes and depreciation.Mixed costs: Utilities and maintenance.

DO IT! 5-2

(a) Variable cost: ($18,580 – $16,200) ÷ (10,500 – 8,800) = $1.40 per unitFixed cost: $18,580 – ($1.40 X 10,500 units) = $3,880

or $16,200 – ($1.40 X 8,800) = $3,880

(b) Total cost to produce 9,200 units: $3,880 + ($1.40 X 9,200) = $16,760

DO IT! 5-3

(a) The formula is $250Q – $170Q – $140,000 = 0. Therefore, 80Q = $140,000,

and the breakeven point in units is 1,750 ($140,000 ÷ $80).

(b) The contribution margin per unit is $80 ($250 – $170). The formula therefore is $140,000 ÷ $80, and the breakeven point in units is 1,750.

DO IT! 5-4

(a) CM per unit = Unit selling price – Unit variable costs$12 = $30 – $18CM ratio = CM per unit/Unit selling price

40% = $12/$30Break-even point in dollars = Fixed costs ÷ Contribution margin ratio

= $220,000 ÷ 40%= $550,000


DO IT! 5-4 (Continued)

(b) Margin of safety =Actual sales – Break-even sales

Actual sales

=$800,000 – $550,000

$800,000

= 31.25%

(c) Sales – Variable costs – Fixed costs = Net income$30Q – $18Q = $220,000 + $140,000$12Q = $360,000

Q = 30,000 units30,000 units X $30 = $900,000 required sales


SOLUTIONS TO EXERCISES

EXERCISE 5-1

(a) The determination as to whether a cost is variable, fixed, or mixed can be made by comparing the cost in total and on a per-unit basis at two different levels of production.

Variable CostsFixed CostsMixed Costs

Vary in total but remain constant on a per-unit basis.Remain constant in total but vary on a per-unit basis.Contain both a fixed element and a variable element. Vary both in total and on a per-unit basis.

(b) Using these criteria as a guideline, the classification is as follows:

Direct materialsDirect laborUtilities

VariableVariableMixed

RentMaintenanceSupervisory salaries

FixedMixedFixed

EXERCISE 5-2

(a)


EXERCISE 5-2 (Continued)

(b) The relevant range is 3,000 – 8,000 units of output since a straight-line relationship exists for both direct materials and rent within this range.

(c) Variable cost per unit

Within the relevant range= Cost

Units(3,000 – 8,000 units)

= $15,000* 5,000*

=$3 per

unit

*Any costs and units within the relevant range could have been used to calculate the same unit cost of $3.

(d) Fixed cost within therelevant range = $8,000(3,000 – 8,000 units)

EXERCISE 5-3

(a) Maintenance Costs:$4,900–$2,500700–300 = $2,400400 = $6 variable cost per machine hour

700Machine Hours

300Machine Hours

Total costsLess: Variable costs

700 X $6 300 X $6

Total fixed costs

$4,900

4,200 $ 700

$2,500

1,800 $ 700

Thus, maintenance costs are $700 per month plus $6 per machine hour.



(b) $5,000

CO

ST

S

Total Cost Line $4,900

$4,000

$3,000

Variable Cost Element

$2,000

$1,000

Fixed Cost Element

0 100 200 300 400 500 600 700

Machine Hours

EXERCISE 5-4

1. Wood used in the production of furniture. Variable. 2. Fuel used in delivery trucks. Variable. 3. Straight-line depreciation on factory building. Fixed. 4. Screws used in the production of furniture. Variable. 5. Sales staff salaries. Fixed. 6. Sales commissions. Variable. 7. Property taxes. Fixed. 8. Insurance on buildings. Fixed. 9. Hourly wages of furniture craftsmen. Variable.10. Salaries of factory supervisors. Fixed.11. Utilities expense. Mixed.12. Telephone bill. Mixed.


$ 700

EXERCISE 5-5

(a) Maintenance Costs:$5,000 – $2,7508,000 – 3,500=$2,2504,500 = $.50 variable cost per machine hour

Activity LevelHigh Low


8,000 X $.503,500 X $.50

Total fixed costs

$5,000

4,00000,000$1,000

$2,750

1,750$1,000

Thus, maintenance costs are $1,000 per month plus $.50 permachine hour.

(b) $5,000

CO

ST

S

Total Cost Line

$4,000

$3,000 Variable Cost Element

$2,000

Fixed Cost Element

0 2,000 4,000 6,000 8,000

Machine Hours


$1,000

EXERCISE 5-6

(a) Cost Fixed Variable MixedDirect materials XDirect labor XUtilities XProperty taxes XIndirect labor XSupervisory salaries XMaintenance XDepreciation X

(b) Fixed costs = $1,000 + $1,900 + $2,400 + $300 + $200

= $5,800

Variable costs to produce 3,000 units = $7,500 + $18,000 + $4,500= $30,000

Variable cost per unit = $30,000/3,000 units= $10 per unit

Variable cost portion of mixed cost = Total cost – Fixed portion

Utilities:Variable cost to produce 3,000 units = $2,100 – $300

= $1,800

Variable cost per unit = $1,800/3,000 units= $.60 per unit

Maintenance:Variable cost to produce 3,000 units = $1,100 – $200

= $900

Variable cost per unit = $900/3,000 units= $.30 per unit

Cost to produce 5,000 units = (Variable costs per + Fixed cost unit X 5,000 units)

= (($10 + $.60 + $.30) X 5,000) + $5,800= $54,500 + $5,800= $60,300


EXERCISE 5-7

MEMO

To: Jim Taylor

From: Student

Re: Assumptions underlying CVP analysis

CVP analysis is a useful tool in analyzing the effects of changes in costs and volume on a company’s profits. However, there are some assumptions which underline CVP analysis. When these assumptions are not valid, the results of CVP analysis may be inaccurate.

The five assumptions are:1. The behavior of both costs and revenues is linear throughout

the relevant range of the activity index.2. All costs can be classified accurately as either fixed or variable.3. Changes in activity are the only factors that affect costs.4. All units produced are sold.5. When more than one type of product is sold, the sales mix will

remain constant.

If you want further explanation of any of these assumptions, please contact me.

EXERCISE 5-8

(a) Contribution margin per lawn

Contribution margin per lawn

Contribution margin ratio

=

=

=

$60 – ($12 + $10 + $2)

$36

$36 ÷ $60 = 60%

Fixed costs = $1,400 + $200 + $2,000 = $3,600

Break-even point in lawns = $3,600 ÷ $36 = 100

(b) Break-even point in dollars = 100 lawns X $60 per lawn= $6,000 per month

ORFixed costs ÷ Contribution margin ratio = $3,600 ÷ .60

= $6,000 per month


EXERCISE 5-9

1. Contribution margin per room

Contribution margin per room

Contribution margin ratio

=

=

=

$60 – ($11 + $28)

$21

$21 ÷ $60 = 35%

Fixed costs = $6,200 + $1,100 + $1,000 + $100 = $8,400

Break-even point in rooms = $8,400 ÷ $21 = 400

2. Break-even point in dollars = 400 rooms X $60 per room= $24,000 per month

ORFixed costs ÷ Contribution margin ratio = $8,400 ÷ .35

= $24,000 per month

EXERCISE 5-10

(a) Contribution margin in dollars: Sales = 560 X $120 = $67,200Variable costs = $67,200 X .60 = 40,320 Contribution margin $26,880

Contribution margin per unit: $120 – $72 ($120 X 60%) = $48.Contribution margin ratio: $48 ÷ $120 = 40%.

(b) Break-even sales in dollars:$21,02440% = $52,560.

Break-even sales in units:$21,024$48= 438.


EXERCISE 5-11

(a) 1. Contribution margin ratio is: $27,000 = 75%$36,000

Break-even point in dollars = $15,000 = $20,00075%

2. Round-trip fare = $36,000 = $251,440 fares

Break-even point in fares = $20,000 = 800 fares$25

(b) At the break-even point fixed costs and contribution margin are equal. Therefore, the contribution margin at the break-even point would be $15,000.

EXERCISE 5-12

(a) Unit contribution margin =Fixed costsBreak-even sales in units

=$112,000($350,000÷ $5)

= $1.60

Variable cost per unit = Unit selling price – Unit contribution margin= $5.00 – $1.60= $3.40

OR= 70,000 X $5.00 = 70,000X + $112,000= where X = Variable cost per unit= Variable cost per unit = $3.40

Contribution margin ratio = $1.60 ÷ $5.00 = 32%



(b) Fixed costs ÷ Contribution margin ratio = Break-even sales in dollarsFixed costs ÷ .32 = $420,000

= $134,400 ($420,000 X.32)

Since fixed costs were $112,000 in 2013, the increase in 2014 is $22,400 ($134,400 – $112,000).

EXERCISE 5-13

(a) CANNES COMPANYCVP Income Statement

For the Month Ended September 30, 2014

Total Per UnitSales (600 video game consoles)................... $240,000 $400Variable costs................................................... 165,000 275Contribution margin......................................... 75,000 $125Fixed costs....................................................... 52,000Net income........................................................ $ 23,000

(b) Sales = Variable costs + Fixed costs$400X = $275X + $52,000$125X = 52,000

X = 416 units

(c) CANNES COMPANYCVP Income Statement

For the Month Ended September 30, 2014

Total Per UnitSales (416 video game consoles)................... $166,400 $400Variable costs................................................... 114,400 275Contribution margin......................................... 52,000 $125Fixed costs....................................................... 52,000Net income........................................................ $ –0–


EXERCISE 5-14

(a) Units sold in 2013 = $570,000 +$210,000$150–$90 = 13,000 units

(b) Units needed in 2014 = $570,000 +$262,000*$150 –$90 = 13,867 units (rounded)

*$210,000 + $52,000 = $262,000

(c)$570,000 +$262,000X –$90 = 13,000 units, where X = new selling price

$832,000 = 13,000X – $1,170,000

$2,002,000 = 13,000X

X = $154

EXERCISE 5-15

1. Unit sales price = $400,000 ÷ 5,000 units = $80Increase selling price to $88, or ($80 X 110%).Net income = $440,000 – $210,000 – $90,000 = $140,000.

2. Reduce variable costs to 45% of sales.Net income = $400,000 – $180,000 – $90,000 = $130,000.

Alternative 1, increasing selling price, will produce the highest net income.


EXERCISE 5-16

(a) $3,200 Sales LineD

OL

LA

RS

(00

0)

2,800

2,400 Total Cost LineBreak-even Point

2,000

1,600

1,200

800 Fixed Cost Line

400

100 200 300 400 500 600 700 800

Number of Units (in thousands)

(b) 1. Break-even sales in units:

$4X = $2.50X + $600,000 $1.50X = $600,000

X = 400,000 units

2. Break-even sales in dollars:

X = .625X + $600,000.375X = $600,000

X = $1,600,000 or $600,000 ÷ 37.5%

(c) 1. Margin of safety in dollars: $2,000,000 – $1,600,000 = $400,000

2. Margin of safety ratio: $400,000 ÷ $2,000,000 = 20%


EXERCISE 5-17

(a) Contribution ratio = Contribution margin ÷ Sales($40 – $16) ÷ $40 = 60%

(b) Break-even in dollars: $19,500 ÷ 60% = $32,500

(c) Margin of safety = (2,600 X $40) – $32,500 = $71,500$71,500 ÷ $104,000 = 68.75%

(d) Current contribution margin $40 – $16 = $24Total contribution margin is $24 X 2,600 = $62,40030% increase in contribution margin is $62,400 X 30% = $18,720Total increase in sales required: $18,720 ÷ 60% = $31,200


SOLUTIONS TO PROBLEMS

PROBLEM 5-1A

(a) Variable costs (per haircut) Fixed costs (per month)

Barbers’ commission $4.50Barber supplies .30Utilities .20Total variable cost per haircut $5.00

Barbers’ salaries $4,000Manager’s extra salary 500Advertising 200Rent 1,100Utilities 175Magazines 25Total fixed $6,000

(b) $10.00X = $5.00X + $6,000$ 5.00X = $6,000 X = 1,200 haircuts

1,200 haircuts X $10 = $12,000

(c) 18 Sales Line

DO

LL

AR

S (

000)

15 Total Cost LineBreak-even Point

12

9

Fixed Cost Line 6

3

300 600 900 1,200 1,500 1,800

Number of Haircuts

(d) Net income = $17,000 – [($5.00 X 1,700) + $6,000]


= $2,500


PROBLEM 5-2A

(a) JORGE COMPANYCVP Income Statement (Estimated)

For the Year Ending December 31, 2014

Sales................................................................ $1,800,000Variable expenses

Cost of goods sold................................. $1,170,000*Selling expenses.................................... 70,000Administrative expenses....................... 20,000

Total variable expenses................. 1,260,000Contribution margin....................................... 540,000Fixed expenses

Cost of goods sold................................. 280,000Selling expenses.................................... 65,000Administrative expenses....................... 60,000

Total fixed expenses...................... 405,000Net income...................................................... $ 135,000

*Direct materials $430,000 + direct labor $360,000 + variable manufacturing overhead $380,000.

(b) Variable costs = 70% of sales ($1,260,000 ÷ $1,800,000) or $.35 per bottle ($.50 X 70%). Total fixed costs = $405,000.

1. $.50X = $.35X + $405,000$.15X = $405,000 X = 2,700,000 units

2. 2,700,000 X $.50 = $1,350,000

(c) Contribution margin ratio = ($.50 – $.35) ÷ $.50= 30% (or 1 – .70)

Margin of safety ratio = ($1,800,000 – $1,350,000) ÷ $1,800,000= 25%

(d) Required sales


X = $405,000 + $180,000.30 = $1,950,000


PROBLEM 5-3A

(a) Sales were $2,500,000, variable expenses were $1,700,000 (68% of sales), and fixed expenses were $900,000. Therefore, the break-even point in dollars is:$900,000.32 = $2,812,500

(b) 1. The effect of this alternative is to increase the selling price per unit to $6 ($5 X 120%). Total sales become $3,000,000 (500,000 X $6). Thus, the contribution margin ratio changes to 43% [($3,000,000 – $1,700,000) ÷ $3,000,000]. The new break-even point is:$900,000.43 = $2,093,023 (rounded)

2. The effects of this alternative are to change total fixed costs to $810,000 ($900,000 – $90,000) and to change the contribution margin to 27% [($2,500,000 – $1,700,000 – $125,000) ÷ $2,500,000]. The new break-even point is:$810,000.27 = $3,000,000

Alternative 1 is the recommended course of action because it has a lower break-even point.


PROBLEM 5-4A

(a) Current break-even point: $40X = $24X + $270,000(where X = pairs of shoes)

$16X = $270,000X = 16,875 pairs of shoes

New break-even point: $38X = $24X + ($270,000 + $24,000)$14X = $294,000

X = 21,000 pairs of shoes

(b) Current margin of safety ratio = (20,000 X $40) –(16,875 X $40) (20,000 X $40)

= 16% (rounded)

New margin of safety ratio = (24,000 X $38) – (21,000 X $38) (24,000 X $38)

= 13% (rounded)

(c) BARGAIN SHOE STORECVP Income Statement

Current New

Sales (20,000 X $40)Variable expenses (20,000 X $24)Contribution marginFixed expensesNet income

$800,000 480,000 320,000 270,000 $ 50,000

$912,000 576,000 336,000 294,000 $ 42,000

(24,000 X $38)(24,000 X $24)

The proposed changes will raise the break-even point 4,125 units. This is a significant increase. Margin of safety is 3% lower and net income is $8,000 lower. The recommendation is to not accept the proposed changes.


PROBLEM 5-5A

(a) (1)Current Year

Sales

Variable costsDirect materialsDirect laborManufacturing overhead ($350,000 X .70)Selling expenses ($250,000 X .40)Administrative expenses ($270,000 X .20)

Total variable costsContribution margin

$1,500,000

511,000290,000245,000100,000

54,000 1,200,000 $ 300,000

Current Year Projected YearSales

Variable costsDirect materialsDirect laborManufacturing overheadSelling expensesAdministrative expenses


$1,500,000

511,000290,000245,000100,000

54,000 1,200,000 $ 300,000

X 1.1

X 1.1X 1.1X 1.1X 1.1X 1.1X 1.1X 1.1

$1,650,000

562,100319,000269,500110,000

59,400 1,320,000 $ 330,000

(2)Fixed Costs Current Year Projected year

Manufacturing overhead ($350,000 X .30)Selling expenses ($250,000 X .60)Administrative expenses ($270,000 X .80)

Total fixed costs

$105,000150,000

216,000 $471,000

$105,000150,000

216,000 $471,000


PROBLEM 5-5A (Continued)

(b) Unit selling price = $1,500,000 ÷ 100,000 = $15Unit variable cost = $1,200,000 ÷ 100,000 = $12Unit contribution margin = $15 – $12 = $3Contribution margin ratio = $3 ÷ $15 = .20

Break-even point in units = Fixed costs ÷ Unit contribution margin157,000 units = $471,000 ÷ $3

Break-even point in dollars = Fixed costs ÷ Contribution margin ratio$2,355,000 = $471,000 ÷ .20

(c) Sales dollarsrequired for = (Fixed costs + Target net income) ÷ Contribution margin ratiotarget net income

$3,355,000 = ($471,000 + $200,000) ÷ .20

(d) Margin of safetyratio

= (Expected sales – Break-even sales) ÷ Expected sales

29.8% = ($3,355,000 – $2,355,000) ÷ $3,355,000


PROBLEM 5-6A

(a) 1. Let variable selling and administrative expenses = VSASales – Variable cost of goods sold – VSA = Contribution Margin$1,200,000 – ($400,000 + $500,000 + $50,000 + VSA) = $180,000VSA = $70,000

2. Let fixed manufacturing overhead = FMOSales – Variable cost of goods sold – FMO = Gross profit$1,200,000 – ($400,000 + $500,000 + $50,000 + FMO) = $180,000FMO = $70,000

3. Let fixed selling and administrative expenses = FSA

Contribution margin ratio = $180,000 ÷ $1,200,000 = 15%Contribution margin at break-even = $1,300,000 X 15% = $195,000

At break-even, Contribution margin = Fixed costs (FSA + FMO)$195,000 = FSA + $70,000FSA = $125,000

(b) Incremental sales = $1,200,000 X 25% = $300,000Incremental contribution margin = $300,000 X 15% = $45,000

The maximum increased advertising expenditure would be equal to the incremental contribution margin earned on the increased sales, which is $45,000. The other fixed costs are irrelevant to this decision, because they would be incurred whether or not the advertising expen-diture is increased.


PROBLEM 5-1B

(a) Variable costs (per haircut) Fixed costs (per month)

Barbers’ commission $3.00Rent .60Barber supplies .40

Total variable $4.00

Barbers’ salaries $7,500*Rent 700Depreciation 400Utilities 300Advertising 100

Total fixed $9,000

*($1,500 X 3) + $3,000

(b) $10X = $4X + $9,000 $6X = $9,000 X = 1,500 haircuts

1,500 haircuts X $10 = $15,000

(c) 18Break-even Point

Sales Line

DO

LL

AR

S (

000)

15 Total Cost Line

12

9 Fixed Cost Line

6

3

300 600 900 1,200 1,500 1,800

Number of Haircuts

(d) Net income = $18,000 – [($4.00 X 1,800) + $9,000]= $1,800


PROBLEM 5-2B

(a) ALL FRUTE COMPANYCVP Income Statement (Estimated)

For the Year Ending December 31, 2014

Sales........................................................ $2,500,000Variable expenses

Cost of goods sold......................... $1,080,000 (1)Selling expenses............................. 80,000Administrative expenses................ 40,000

Total variable expenses.......... 1,200,000Contribution margin............................... 1,300,000Fixed expenses

Cost of goods sold......................... 380,000Selling expenses............................. 250,000Administrative expenses................ 150,000

Total fixed expenses............... 780,000Net income.............................................. $ 520,000

(1) Direct materials $360,000 + direct labor $450,000 + variable manufac-turing overhead $270,000.

(b) Variable costs = 48% of sales ($1,200,000 ÷ $2,500,000) or $.24 per bottle ($.50 X 48%). Total fixed costs = $780,000.

1. $.50X = $.24X + $780,000$.26X = $780,000 X = 3,000,000 units (breakeven)

2. 3,000,000 X $.50 = $1,500,000

(c) Contribution margin ratio = ($.50 – $.24) ÷ $.50= 52%

Margin of safety ratio = ($2,500,000 – $1,500,000) ÷ $2,500,000= 40%

(d) Required sales


X = $780,000 + $624,000.52 = $2,700,000


PROBLEM 5-3B

(a) Sales were $1,800,000 and variable expenses were $1,170,000, which means contribution margin was $630,000 and CM ratio was 35%. Fixed expenses were $840,000. Therefore, the breakeven point in dollars is:$840,000.35 = $2,400,000

(b) 1. The effect of this alternative is to increase the selling price per unit to $37.50 ($30 X 125%). Total sales become $2,250,000 (60,000 X $37.50). Thus, the contribution margin ratio changes to 48% [($2,250,000 – $1,170,000) ÷ $2,250,000]. The new breakeven point is:$840,000.48 = $1,750,000

2. The effects of this alternative are to change total fixed costs to $660,000 ($840,000 – $180,000) and to change the contribution margin to .30 [($1,800,000 – $1,170,000 – $90,000) ÷ $1,800,000]. The new breakeven point is:$660,000.30 = $2,200,000

3. The effects of this alternative are: (1) variable and fixed cost of goods sold become $675,000 each, (2) total variable costs become $915,000 ($675,000 + $125,000 + $115,000), and (3) total fixed costs are $1,095,000 ($675,000 + $355,000 + $65,000). The new breakeven point is:

X = ($915,000 ÷ $1,800,000)X + $1,095,000 X = .51X + $1,095,000.49X = $1,095,000 X = $2,234,694 (rounded)

Alternative 1 is the recommended course of action using breakeven analysis because it has the lowest breakeven point.


PROBLEM 5-4B

(a) Current break-even point: $30X = $12X + $216,000(where X = pairs of shoes)

$18X = $216,000 X = 12,000 pairs of shoes

New break-even point: $27X = $12X + ($216,000 + $18,000)$15X = $234,000 X = 15,600 pairs of shoes

(b) Current margin of safety ratio = (20,000 X $30) – (12,000 X $30) (20,000 X $30)

= 40%

New margin of safety ratio = (24,000 X $27)* – (15,600 X $27) (24,000 X $27)

= 35%

*$30 X $90

(c) COSTLESS SHOE STORECVP Income Statement

Current New

Sales (20,000 X $30)Variable expenses (20,000 X $12)Contribution marginFixed expensesNet income

$600,000 240,000 360,000 216,000 $144,000

$648,000 288,000 360,000 234,000 $126,000

(24,000 X $27)(24,000 X $12)

No, the changes should not be made because net income will be lower than the net income currently earned. In addition, the break-even point


would be higher by 3,600 units and the margin of safety ratio would decrease from 40% to 35%.


PROBLEM 5-5B

(a) (1)Current Year

Sales

Variable costsDirect materialsDirect laborManufacturing overhead ($480,000 X .40)Selling expenses ($400,000 X .30)Administrative expenses ($484,000 X .50)


$1,800,000

456,000250,000192,000120,000

242,000 1,260,000 $ 540,000

Current Year Projected YearSales

Variable costsDirect materialsDirect laborManufacturing overheadSelling expensesAdministrative expenses


$1,800,000

456,000250,000192,000120,000

242,000 1,260,000 $ 540,000

X 1.2

X 1.2X 1.2X 1.2X 1.2X 1.2X 1.2X 1.2

$2,160,000

547,200300,000230,400144,000

290,400 1,512,000 $ 648,000

(2) Current ProjectedFixed Costs Year Year

Manufacturing overhead ($480,000 X .60)Selling expenses ($400,000 X .70)Administrative expenses ($484,000 X .50)

Total fixed costs

$288,000280,000

242,000 $810,000

$288,000280,000

242,000 $810,000


PROBLEM 5-5B (Continued)

(b) Unit selling price = $1,800,000 ÷ 100,000 = $18.00Unit variable cost = $1,260,000 ÷ 100,000 = $12.60Unit contribution margin = $18.00 – $12.60 = $5.40Contribution margin ratio = $5.40 ÷ $18.00 = .30

Break-even point in units = Fixed costs ÷ Unit contribution margin150,000 units = $810,000 ÷ $5.40

Break-even point in dollars = Fixed costs ÷ Contribution margin ratio$2,700,000 = $810,000 ÷ .30

(c) Sales dollarsrequired for = (Fixed costs + Target net income) ÷ Contribution margin ratiotarget net income$3,410,000 = ($810,000 + $213,000) ÷ .30

(d) Margin of safetyratio

= (Expected sales – Break-even sales) ÷ Expected sales

21*% = ($3,410,000 – $2,700,000) ÷ 3,410,000*(Rounded)

(e) (1)

Sales

Variable costsDirect materialsDirect labor ($250,000 – $100,000)Manufacturing overhead ($480,000 X .10)Selling expenses ($400,000 X .80)Administrative expenses ($484,000 X .50)


$1,800,000

456,000150,000

48,000320,000

242,000 1,216,000 $ 584,000


PROBLEM 5-5B (Continued)

(2)Contribution margin ratio = $584,000 ÷ $1,800,000 = .32 (Rounded)

(3)Break-even point in dollars = $754,000 ÷ .32 = $2,356,250

Fixed costsManufacturing overhead ($480,000 X .90)Selling expenses ($400,000 X .20)Administrative expenses ($484,000 X .50)

Total fixed costs

$432,00080,000

242,000 $754,000

The break-even point in dollars declined from $2,700,000 to $2,356,250. This means that overall the company’s risk has declined because it doesn’t have to generate as much in sales. The two changes actually had opposing effects on the break-even point. By changing to a more commission based approach to compensate its sales staff, the company reduced its fixed costs, and therefore reduced its break-even point. In contrast, the purchase of the new equipment increased the company’s fixed costs (by increasing its equipment depreciation) and reduced its variable direct labor cost, both of which would increase the break-even point.


PROBLEM 5-6B

(a) 1. Let variable selling and administrative expenses = VSASales – Variable cost of goods sold – VSA = Contribution Margin$2,000,000 – ($600,000 + $700,000 + $200,000 + VSA) = $150,000VSA = $350,000

2. Let fixed manufacturing overhead = FMOSales – Variable cost of goods sold – FMO = Gross profit$2,000,000 – ($600,000 + $700,000 + $200,000 + FMO) = $400,000FMO = $100,000

3. Let fixed selling and administrative expenses = FSA

Contribution margin ratio = $150,000 ÷ $2,000,000 = 7.50%Contribution margin at break-even = $2,400,000 X 7.50% = $180,000

At break-even, Contribution margin = Fixed costs (FSA + FMO)$180,000 = FSA + $100,000FSA = $80,000

(b) Incremental sales = $2,000,000 X 15% = $300,000Incremental contribution margin = $300,000 X 7.50% = $22,500

The maximum increased advertising expenditure would be equal to the incremental contribution margin earned on the increased sales, which is $22,500. The other fixed costs are irrelevant to this decision, because they would be incurred whether or not the advertising expenditure is increased.


BYP 5-1 DECISION-MAKING AT CURRENT DESIGNS

(a) $250 + $100 + $170 + $420 + $400 = $1,340 total variable costs

(b) Contribution margin per unit = $2,000 – $1,340 = $660

(c) $359,700* ÷ $660 = 545 units

*$119,700 ÷ $240,000

(d) ($359,700 + $270,600) ÷ $660 = 955 units

(e) Actual (expected) sales = $2,000 X 1,000 = $2,000,000

Break-even sales = $2,000 X 545 = $1,090,000

Margin of safety in dollars = $2,000,000 – $1,090,000= $910,000

Margin of safety ratio = $910,000 ÷ $2,000,000= 45.5%


BYP 5-2 DECISION-MAKING ACROSS THE ORGANIZATION

(a)

(1) Capital-Intensive (2) Labor-Intensive

Fixed manufacturing costs $2,524,000Incremental selling expenses 502,000Total fixed costs $3,026,000

Fixed manufacturing costs $1,550,000Incremental selling expenses 502,000Total fixed costs $2,052,000

Selling price $32.00Variable costs

Direct materials $5.00Direct labor 6.00Variable overhead 3.00Selling expenses 2.00 16.00

Contribution margin $16.00

Selling price $32.00Variable costs

Direct materials $5.50Direct labor 8.00Variable overhead 4.50Selling expenses 2.00 20.00

Contribution margin $12.00

Total fixed costs (1) $3,026,000 Total fixed costs (1) $2,052,000

Contribution margin per unit (2) $16.00 Contribution margin per unit (2) $12.00

Break-even in units (1) ÷ (2) 189,125 Break-even in units (1) ÷ (2) 171,000

(b) Creative Ideas Company would be indifferent between the two manufac-turing methods at the volume (X) where total costs are equal.

$16X + $3,026,000 = $20X + $2,052,000 $4X = $974,000

X = 243,500 units

(c) Creative Ideas should employ the capital-intensive manufacturing method if annual sales are expected to exceed 243,500 units and the labor-intensive manufacturing method if annual sales are not expected to exceed 243,500 units. The labor-intensive method is more profitable for sales up to 243,500 units because the fixed costs are lower. The capital-intensive method is more profitable for sales above 243,500 units because its contribution margin is higher.


BYP 5-3 MANAGERIAL ANALYSIS

(a) The variable costs per unit are:Cost of goods sold ($600,000 ÷ 240,000)..................... $2.50Selling expenses ($117,600 ÷ 240,000)......................... .49Administrative expenses ($60,000 ÷ 240,000).............. .25

Total......................................................................... $3.24

Fixed costs are:Cost of goods sold ($800,000 X .25)............................. $200,000Selling expenses ($280,000 X .58)................................ 162,400Administrative expenses ($150,000 X .60)................... 90,000

$452,400

The break-even points are: X = ($3.24 ÷ $5.00) X + $452,400 X = .65X + $452,400 .35X = $452,400 X = $1,292,571 (rounded)

$5.00X = $3.24X + $452,400$1.76X = $452,400 X = 257,045 units (rounded)

(b) Variable unit cost of goods sold = $2.75 ($600,000 ÷ 240,000 = $2.50; $2.50 + $.25)Sales volume = 300,000 units (240,000 X 125%)Total sales = 300,000 X $5.25 = $1,575,000

Net income computation:Sales........................................................ $1,575,000Variable expenses

Cost of goods sold (300,000 X $2.75).......................... $825,000Selling expenses (300,000 X $.49)............................ 147,000Administrative expenses (300,000 X $.25)............................ 75,000

Total variable expenses.......... 1,047,000Contribution margin............................... 528,000


BYP 5-3 (Continued)

Fixed expensesCost of goods sold......................... $200,000Selling expenses............................. 162,400Administrative expenses................ 90,000

Total fixed expenses............... 452,400Net income.............................................. $ 75,600

X = ($1,047,000 ÷ $1,575,000)X + $452,400 X = .66X + $452,400

.34X = $452,400 X = $1,330,588 (rounded)

Profits and the break-even point would both increase.

(c) Sales [384,000 (1) X ($5.00 – $.25)]................ $1,824,000Variable expenses

Cost of goods sold (384,000 X $2.50)................................. $960,000Selling expenses (384,000 X $.59)......... 226,560Administrative expenses (384,000 X $.25) .................................. 96,000

Total variable expenses.................. 1,282,560Contribution margin....................................... 541,440Fixed expenses

Cost of goods sold................................. $200,000Selling expenses ($162,400 + $40,000)............................ 202,400Administrative expenses........................ 90,000

Total fixed expenses....................... 492,400Net income...................................................... $ 49,040

(1) Sales volume = 240,000 X 160% = 384,000

X = ($1,282,560 ÷ $1,824,000)X + $492,400 X = .70X + $492,400

.30X = $492,400 X = $1,641,333

Profits and the break-even point would both increase.


(d) Peri’s plan should be accepted. It produces a higher net income anda lower break-even point than Paul’s plan.


BYP 5-4 REAL-WORLD FOCUS

(a) Sweeteners and packaging are a variable cost to Coca-Cola because their use is directly proportional to the amount of product produced. If the unit cost of a variable cost item increases, the contribution margin will decline. This will lead to a decline in net income unless the company can increase its selling price, increase the number of units it sells, or reduce other costs.

(b) This description makes the marketing expenditures sound like they are a variable cost, since it suggests that they vary with the amount of units sold. However, unlike variable costs, the relationship of marketing costs is not directly proportional to sales, since other factors also influence units sold. Thus, it is not a pure variable cost. However, it is also not a fixed cost, in that there usually is a relationship between marketing expenditures and sales. For CVP purposes, it might best be handled as a mixed cost, having both a fixed and variable component.

(c) The first measure, gallon shipments of concentrates and syrups, is the activity index, since it best reflects the company’s production and sales activity at the wholesale level, its primary line of business. The second measure, unit cases of finished product, indicates the amount of activity by Coke’s primary customers, the bottlers. Coke also keeps track of this since it provides information about what is happening at the retail level.


BYP 5-5 REAL-WORLD FOCUS

(a) Barnes and Noble has 1,362 stores with a total of 18.8 million square feet. That is a huge investment in fixed costs that have very little value in an e-book environment.

(b) Barnes and Noble’s big advantage (which enabled it to put lots of small independent book sellers out of business), was that each of its superstores had 150,000 books in stock. However, that is no longer as impressive when you consider that booksellers’ websites now give you access to millions of e-book titles which can be downloaded directly to e-readers.

(c) The authors say that the arrival of Apple’s iPad has huge implications for e-books. ITunes has more than 125 million customers. They represent a very wide potential audience for e-books.

(d) Barnes and Nobel earns about $12.50 on a $25 hardcover book. The same book, as an e-book, would sell for $12.99 and Barnes and Noble would earn $3.90. Obviously they can’t afford this decline unless they can dramatically reduce their fixed costs.

(e) Barnes and Noble was one of the first companies to have an e-reader, called the Rocket e-book. However, it abandoned its e-reader in 2003 because sales of e-books had been very low. Four years later Amazon introduced its Kindle e-reader, which has been hugely popular. A second mistake was that Barnes and Noble was very slow to upgrade its website to encourage the sale of e-books. Again, Amazon was more than happy to fill the void.


BYP 5-6 COMMUNICATION ACTIVITY

To: My Roommate

From: Your Roommate

Subject: Cost-Volume-Profit Questions

In response to your request for help, I provide you the following:

(a) The mathematical formula for break-even sales is:

Break-even Sales = Variable Costs + Fixed Costs

Break-even sales in dollars is found by expressing variable costs as a percentage of unit selling price. For example, if the percentage is 70%, the break-even formula becomes X = .70X + Fixed Costs. The answer will be in sales dollars.

Break-even sales in units is found by using unit selling price and unit variable costs in the formula. For example, if the selling price is $300 and variable costs are $210, the break-even formula becomes $300X = $210X + Fixed Costs. The answer will be in sales units.

(b) The formulas for contribution margin per unit and contribution margin ratio differ as shown below:

Unit Selling Price – Unit Variable Costs = Contribution Margin per Unit

Contribution Margin per Unit ÷ Unit Selling Price = Contribution Margin Ratio

You can see that CM per Unit is used in computing the CM ratio.

(c) When contribution margin is used to determine break-even sales, total fixed costs are divided by either the contribution margin ratio or contri-bution margin per unit. Using the CM ratio results in determining the break-even point in dollars. Using CM per unit results in determining the break-even point in units.


BYP 5-6 (Continued)

The formula for determining break-even sales in dollars is:

Fixed Costs ÷ Contribution Margin Ratio = Break-even Sales in Dollars

The formula for determining break-even sales in units is:

Fixed Costs ÷ Contribution Margin per Unit = Break-even Sales in Units

I hope this memo answers your questions.


BYP 5-7 ETHICS CASE

(a) The stakeholders in this situation are:

Scott Bestor, accountant of Westfield Company. The dislocated personnel of Westfield. The senior management who made the decision.

(b) Scott is hiding an error and is knowingly deceiving the company’s management with inaccurate data.

(c) Scott’s alternatives are:

Keep quiet. Confess his mistake to management.

The students’ recommendations should recognize the practical aspects of the situation but they should be idealistic and ethical. If the students can’t be totally ethical when really nothing is at stake, how can they expect to be ethical under real-world pressures?


BYP 5-8 ALL ABOUT YOU

(a) The variable gasoline cost of going one mile in the hybrid car would be $0.09 ($3.60/40). The variable gasoline cost of going one mile in the traditional car would be $0.12 ($3.60/30).

(b) The savings per mile of driving the hybrid vehicle would be $0.03 ($0.12 – $0.09).

(c) In order to break even on your investment, you would need to drive 150,000 miles. This is determined by dividing the additional fixed cost of $4,500 by the cost savings per mile of $0.03.

(d) There are many other factors that you would want to consider in your analysis. For example, do the vehicles differ in their expected repair bills, insurance costs, licensing fees, or ultimate resale value. Also, some states and some employers offer rebates for the purchase of hybrid vehicles. In addition, your decision might be influenced by non-financial factors, such as a desire to reduce emissions.


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Documents

margin of safety ratio

acompute breakeven point

bcompute breakeven point

acompute contribution

cvp income statement

fixed costs

target net income

behavior of costs