Question: Cost behavior and cost-volume-profit analysis
This assignment consists of four independent scenarios for which computations should be shown.
Scenario A: Compute the break-even point in sales dollars if fixed costs are $200,000 and the total contribution margin is 20% of revenue.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario B: Danny Company makes and sells stuffed animals. One product, Panda Bear, sells for $28 per bear. Panda Bears incur fixed costs of $100,000 per month and a variable cost of $12 per bear. How many Panda Bears must be produced and sold each month to break even?
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario C: Jerry is considering buying a company if it will break even or earn net income on revenues of $80,000 per month. The company that Jerry is considering sells each unit it produces for $5. Use the following cost data to compute the variable cost per unit and the fixed cost for the period. Calculate the break-even point in sales dollars. Should Jerry purchase this company?
|
Volume (units)
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Total Cost
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|
8,000
|
$70,000
|
|
68,000
|
$190,000
|
HINT: Total costs include both variable and fixed portion, so it is necessary to break down total costs into variable and fixed before computing break-even.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario D: Reliable Delivery currently delivers packages for $9 each. The variable cost is $3 per package, and fixed costs are $60,000 per month. Compute the break-even point in both sales dollars and units under each of the following independent assumptions. Comment on why the break-even points are different.
1. The costs and selling price are as just given.
2. Fixed costs are increased to $75,000.
3. Selling price is increased by 10%. (Fixed costs are $60,000.)
4. Variable cost is increased to $4.50 per unit. (Fixed costs are $60,000 and selling price is $9.)
5. Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
SLP Assignment Expectations
Show computations in good format and explain answers as required. Excel is a great tool to make computations and present financial information in an easy to understand format. Write comments below the computations in Excel. Submit only the Excel file. Both content and the clarity of the presentation will be evaluated for grading purposes.