Sabuero, Arturo Jr.

B
BSIE – 3B

COST VOLUME PROFIT ANALYSIS

QUESTION 1
Bridal Shoppe sells wedding dresses. The cost of each dress is comprised of the Following:
Selling price of $1,000
variable (flexible) costs of $400.
Total fixed (capacity-related) costs for Bridal Shoppe are $90,000.
A. What is the contribution margin per dress?

Revenues per dress– Variable Cost per dress = CM per dress

$1,000 - $400 = $600
B. What is the Bridal Shoppe’s total profit when 200 dresses are sold?

Revenues – Variable Costs – Fixed Costs = Total Profit

200 ($1,000) – 200($400) - $90,000 = $30,000
C. How many dresses must Bridal Shoppe sell to reach the breakeven point?

X = Fixed Costs/Contribution Margin per dress

X = $90,000/$600
X = 150 dresses
D. How many dresses must Bridal Shoppe sell to yield a profit of $60,000
Total Revenues – Total Costs = Total Profit
$1,000X - $400X - $90,000 = $60,000
$600X = $150,000
X = $150,000/$600
X = 250 dresses
QUESTION 2
Northenscold Company sells several products. Information of average revenue and costs are as
follows:
Selling price per unit $20.00
Variable costs per unit:
Direct materials $4.00
Direct manufacturing labor $1.60
Manufacturing overhead $0.40
Selling costs $2.00
Annual fixed costs $96,000

A. Calculate the contribution margin per unit.

$20 - $4 - $1.60 - $0.40 - $2 = $12
B. Calculate the number of units Northenscold’s must sell each year to break even.
20X - 8X - 96,000 = 0
12X – 96,000 = 0
12X/12 = 96,000/12
X = 8,000 units
C. Calculate the number of units Northenscold’s must sell to yield a profit of $144,000.
20X – 8X – 96,000 = $144,000
12X – 96,000 = 144,000
12X/12 = 240,000/12
X = 20,000 units
QUESTION 3
Berhannan’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling
commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and
administrative costs total $2,500.
A. What is the contribution margin per phone?

CM per phone
= $100 - $50 - 0.1($100)
= $40
B. What is the breakeven point in phones?

N = Breakeven in phones
$100N - $50N - $10N - $1,250 - $2,500 = 0
$40N - $3,750 = 0
N = $3,750 / $40 = 93.75 phones
Breakeven Point = 94 phones
c. How many phones must be sold to earn a targeted profit of $7,500?

N = Phones to be sold
$100N - $50N - $10N - $1,250 - $2,500 = $7,500
$40N = $11,250
N = $11,250 / $40 = 281.25 phones
To achieve target profit: Must sell 282 phones