Ask Me Help Desk - Cost volume profit analysis

Quote:

Originally Posted by sweetgirlj811

calculate the following unknowns based on the data below. All situations are independent of each other.

Sales revenue at breakeven point $385,000
Total fixed costs $154,000
Contribution margin ration $ 0.40

a) calculate the total variable cost at the breakeven point
b) assume fixed cost decrease by $10,000 and all other data remains constant. Calculate the new breakeen point in sales dollars
c) Assume variable cost per unit dcrease by 20%. Calculate the new contribution margin ratio
d) Assume variable costs per unit decrease by 10%. calculate the new breakeven point in dollar sales

Break even sales = $385,000
Total fixed cost = 154,000
Contribution margin = $0.40

a) Total variable cost at break even point
Marginal costing equation = sales - variable cost = contribution = fixed cost + profit
At break even point there is no profit no loss.
Thus at break even point sales fixed cost = contribution = 154,000
Variable cost = sales - contribution
= 385,000 - 154,000
= 231,000

b)New break even point sales dollars if fixed cost decreases by $ 10,000
New fixed cost = 154,000 - 10,000
= 144,000
Break even point sales = fixed cost/contribution margin
= 144,000/0.4
= $ 360,000

c) contribution margin per unit = $0.4
Contribution = sales - Variable cost
0.4 = 1 - Vc
VC = 1 -0.4 = 0.6
Variable cost per unit decreases by 20% = 0.12
New variable cost per unit = 0.6 - 0.12 = 0.48
New contribution margin = 1 - 0.48
= $0.52
d) Vc decreases by 10%
= 0.6 - 10% of 0.6
= 0.6 - 0.06
= 0.54
Contribution margin = 1 - 0.54
= 0.46
Break even point = 154,000/0.46
= $334,783