Answers: CVP Problems 5-20 & 5-22

Ricardo R. Palo

Answer to 5-20
Break-even
Per Unit Ratio Units Dollars
1 Sales 20 1.0 15000 300000
VC 14 0.7
CM 6 0.3 90000 90000
FC 90000 90000
0+- 0 0

2 Increased Sales 70000

x CM ratio 0.3
Increased CM 21000
Increased FC 8000
Increased Profit 13000

3 Sales 18 27000 486000

VC 14 378000
CM 4 0.22 108000
FC (90000 + 35000) 125000
Loss -17000

4 Sales 20 17500 350000

VC 14.6
CM 5.4 0.27 94500
FC 90000
Profit 4500

5a Sales 20 16000 320000

VC 7
CM 13 0.65 208000 208000
FC (90000 + 118000) 208000 208000
0+- 0 0

b 20000 18000 15000

NA A NA A NA A
Sales 400000 400000 360000 360000 300000 300000
VC
CM 120000 260000 108000 234000 90000 195000
FC 90000 208000 90000 208000 90000 208000
0+- 30000 52000 18000 26000 0 -13000

c No, because sales is erratic.

Answer to Problem 5-22

1 Sinks Mirrors Vanities Total
Mix 0.32 0.4 0.28 1
Sales 160000 1 200000 1 140000 1 500000
VC 48000 0.3 160000 0.8 77000 0.55 285000
CM 112000 0.7 40000 0.2 63000 0.45 215000
FC 223600
0+- -8600

2 Sales 520000
VC 296400
CM 223600 0.43
FC 223600
0+- 0

3 Change in product mix