Nama : Amelia Zulaikha Pratiwi

NIU : 468610
Kelas : MAK43 - Kelas B
Topic : Chapter 7. Cost Volume Profit Analysis

Exercise 7-39
Selling price $2,75 per pan
Variable Cost :
Direct Material $0,37 per pan
Direct Labor $0,63 per pan
Variable Factory Overhead $0,53 per pan
Variable Selling Expense $0,12 per pan

Fixed Manufacturing Cost $111.425 per year

Administrative Cost (Fixed) $48.350

1. Compute the number of pans that must be sold for Werner to breakeven

Selling price $2,75 per pan

Total Variable Cost : $1,65 per pan
Total Fixed Cost : $159.775

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
Break-even Units= 𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

= $159.775
$1,10

= 145.250 Units

2. Conceptual connection - What is the unit variable cost ? What is the unit variable manufacturing cost
Which is used in cost-volume-profit analysis and why?

Variable cost are costs that in total vary in direct proportion to changes in output within the relevant range.
variable manufacturing costs are costs of manufacturing which the changes depend of level of production output.
Both variable and Fixed costs are used in CVP analysis to estimate how costs, revenues and profits behave as volume changes.
CVP analysis help manager make a better decisions by performing sensitivity analysis.

3. How many pans must be sold for Werner to earn operating income of $13,530
𝑇𝑜𝑡𝑎𝑙 𝐹𝐼𝑥𝑒𝑑 𝐶𝑜𝑠𝑡+𝑇𝑎𝑟𝑔𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Number of Units to earn target income = 𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

= $159.775 + $13.530
$2,75 - $1,65

= $173.305
$1,10

= 157.550 Units

4. How much sales revenue must Werner have to earn operating income of $13,530?
Sales Revenue = 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 𝑥 𝑢𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑

= $2,75 x 157.550

= $433.262,50
Exercise 7-50

Jellico Inc.'s projected operating income (based on sales of 450,000 units for the coming year is as follows :

Total
Sales $11.700.000
Total variable cost $8.190.000
Contribution margin $3.510.000
Total fixed cost $2.254.200
Operating Income $1.255.800

1. Compute : (a) variable cost per unit, (b)contribution margin per unit, (c) contribution margin ratio,
(d) break-even point in units, and (e) break-even pont in sales dollars.

(a) Variable cost per unit (b) Contribution margin per unit
= Variable cost = Contributin margin
Units sold Units sold

= $8.190.000 = $3.510.000
450.000 450.000

= $18,20 = $7,80

(c) Contribution margin ratio

= Contributin margin
Price per unit

= $8
$26

= 30%

(d) Break-even point in units (e) Break-even point in sales dollars

Selling price per unit = $26 BEP Sales = 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 𝑥 𝐵𝐸𝑃 𝑢𝑛𝑖𝑡𝑠

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 = $7.514.000

Break-even Units=
𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

= $2.254.200
$8

= 289.000 Units

2. How many units must be sold to earn operating income of $296,400?

𝑇𝑜𝑡𝑎𝑙 𝐹𝐼𝑥𝑒𝑑 𝐶𝑜𝑠𝑡+𝑇𝑎𝑟𝑔𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Number of Units to earn target income =
𝑃𝑟𝑖𝑐𝑒 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑈𝑛𝑖𝑡

= $2.254.200 + $296.400
$26,00 - $18,20

= $2.550.600
$7,80

= 327.000 Units

3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected

Units sold = $11.750.000

$26

= 451.923 Units

Total
Sales $11.750.000 Additional operating income = $15.000
Total variable cost $8.225.000
Contribution margin $3.525.000
Total fixed cost $2.254.200
Operating Income $1.270.800
4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars

Margin of Safety (units) = 𝑈𝑛𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 − 𝐸𝑣𝑒𝑛 𝑈𝑛𝑖𝑡𝑠

= 450.000 - 289.000

= 161.000 Units

Margin of Safety = 𝑆𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 − 𝐸𝑣𝑒𝑛 𝑆𝑎𝑙𝑒𝑠

= $11.700.000 - $7.514.000

= $4.186.000

5. Compute the degree of operating leverage

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛
Degree of operating leverage= 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒

= $3.510.000
$1.255.800,00

= 2,80

6. Compute the new operating income if sales are 10% than expected

Percentage change in profits = 𝐷𝑒𝑔𝑟𝑒𝑒 𝑜𝑓 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒 𝑥 % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠

= 2,80 x 10%

= 0,28

Expected Operating Income = $1.255.800 + $351.000

= $1.606.800