Wey AP 14e PPT Ch22 Cost-Volume-Profit

Accounting Principles
Fourteenth Edition
Weygandt Kimmel Mitchell
Chapter 22
Cost-Volume-Profit
This slide deck contains animations. Please disable animations if they cause issues with your device.
This deck contains equations authored in Math Type. For the full experience, please download the Math Type software plug-in.
Copyright ©2021 John Wiley & Sons, Inc.

Chapter Outline
Learning Objectives
LO 1 Explain variable, fixed, and mixed costs and the relevant
range.
LO 2 Apply the high-low method to determine the components of
mixed costs.
LO 3 Prepare a CVP income statement to determine contribution
margin.
LO 4 Compute the break-even point using three approaches.
LO 5 Determine the sales required to earn target net income and
determine margin of safety.
Copyright ©2021 John Wiley & Sons, Inc. 2

Cost Behavior Analysis
LEARNING OBJECTIVE 1
Explain variable, fixed, and mixed costs and the relevant
range.
Cost Behavior Analysis is the study of how specific costs
respond to changes in the level of business activity.
• Some costs change; others remain the same.
• Helps management plan operations and decide between
alternative courses of action.
• Applies to all types of businesses and entities.
• Starting point is measuring key business activities.
LO 1 Copyright ©2021 John Wiley & Sons, Inc. 3

Part 1
• Activity levels may be expressed in terms of:
o Sales dollars (in a retail company)
o Miles driven (in a trucking company)
o Room occupancy (in a hotel)
o Dance classes taught (by a dance studio)
• Many companies use more than one measurement

base.

Part 2
• Changes in the level or volume of activity should be
correlated with changes in costs.
• Activity level selected is called activity or volume
index.
• Activity index:
o Identifies the activity that causes changes in the
behavior of costs.
o Allows costs to be classified as variable, fixed, or mixed.

Variable Costs
• Costs that vary in total directly and proportionately
with changes in the activity level.
o Example: If the activity level increases by 10 percent,
total variable costs increase by 10 percent.
o Example: If the activity level decreases by 25 percent,
total variable costs decrease by 25 percent.
• Unit variable costs remain the same at every level of
activity.

Variable Costs
Illustration of total variable costs
Damon Company manufactures cell
phones that contain a $10 camera. The Illustration 22.1
activity index is the number of cell phones
produced. As Damon manufactures each
cell phone, the total cost of the cameras
used increases by $10. As part (a) of
Illustration 22.1 shows, total cost of the
cameras will be $20,000 if Damon
produces 2,000 cell phones, and $100,000
when it produces 10,000 cell phones. We
also can see that unit variable costs
remains the same as the level of activity
changes.

Variable Costs
Illustration of unit variable costs
Damon Company manufactures cell
Illustration 22.1
phones that contain a $10 camera. The
activity index is the number of cell phones
produced. As Damon manufactures each
cell phone, the total cost of the cameras
used increases by $10. As part (b) of
Illustration 22.1 shows, the unit cost of
$10 for the camera is the same whether
Damon produces 2,000 or 10,000 cell
phones.

Variable Costs
Behavior of total and unit variable costs
Illustration 22.1

Fixed Costs
• Costs that remain the same in total regardless of
changes in the activity level within a relevant range.
• Unit fixed costs varies inversely with activity: As
volume increases, unit cost declines, and vice versa.
• Examples:
o Property taxes
o Insurance
o Rent
o Supervisory salaries
o Depreciation on buildings and equipment

Fixed Costs
Illustration of total fixed costs
Damon Company leases its productive Illustration 22.2
facilities at a rent cost of $10,000 per
month. Total fixed costs of the
facilities will remain constant at every
level of activity, as part (a) of
Illustration 22.2 shows.

Fixed Costs
Illustration of unit fixed costs
Damon Company leases its productive
Illustration 22.2
facilities at a cost of $10,000 per month.
Total fixed costs of the facilities will
remain constant at every level of activity.
But, on a per unit basis, the cost of rent
will decline as activity increases, as part
(b) of Illustration 22.2 shows. At 2,000
units, the unit cost per cell phone is $5
($10,000 ÷ 2,000). When Damon
produces 10,000 cell phones, the unit
cost of the rent is only $1 per cell phone
($10,000 ÷ 10,000).

Fixed Costs
Behavior of total and unit fixed costs
Illustration 22.2

Variable Costs
Review Question
Variable costs are costs that:
a. Vary in total directly and proportionately with changes in
the activity level.
b. Remain the same per unit at every activity level.
c. Neither of the above.
d. Both (a) and (b) above.

Variable Costs
Review Answer
Variable costs are costs that:
a. Vary in total directly and proportionately with changes in
the activity level.
b. Remain the same per unit at every activity level.
c. Neither of the above.
d. Answer: Both (a) and (b) above.

Relevant Range
• Throughout the range of possible levels of activity, a

straight-line relationship usually does not exist for either
variable costs or fixed costs.
• Relationship between variable costs and changes in activity
level is often curvilinear.
• For fixed costs, the relationship Helpful Hint

is also nonlinear – some fixed Fixed costs that may be changed
by managers include research,
costs will not change over the
such as new product
entire range of activities, while development, and management
other fixed costs may change. training programs.

Relevant Range
Nonlinear behavior of variable and fixed costs
Illustration 22.3

Relevant Range
Linear behavior within relevant range
Range of activity over which a company expects to
operate during a year.
Illustration 22.4

Relevant Range
Review Question
The relevant range is:
a. The range of activity in which variable costs will be
curvilinear.
b. The range of activity in which fixed costs will be
curvilinear.
c. The range over which the company expects to operate
during a year.
d. Usually from zero to 100% of operating capacity.

Relevant Range
Review Answer
The relevant range is:
a. The range of activity in which variable costs will be
curvilinear.
b. The range of activity in which fixed costs will be
curvilinear.
c. Answer: The range over which the company expects to
operate during a year.
d. Usually from zero to 100% of operating capacity.

Mixed Costs
• Costs that have both a variable cost and a fixed component.
• Change in total but not proportionately with changes in
activity level.
Illustration 22.5

DO IT! 1: Types of Costs
Helena Company reports the following total costs at two

levels of production.
Classify each cost as variable, fixed, or mixed.

High-Low Method
Apply the high-low method to determine the components
of mixed costs.
• High-low method uses the total costs incurred at the high
and the low levels of activity to classify mixed costs into
fixed and variable components.
• The difference in costs between the high and low levels
represents variable costs, since only the variable-cost
component can change as activity levels change.

High-Low Method
Equation for unit variable costs
Step 1: Determine unit variable costs using the following
equation:
Illustration 22.6

High-Low Method
Computation of unit variable costs
Metro Transit Company has the following maintenance costs and

mileage data for its fleet of buses over a 6-month period.
Illustration 22.7

High-Low Method
Computation of fixed costs
Step 2: Determine the total fixed cost by subtracting the total
variable cost at either the high or the low activity level from the
total cost at that activity level.
Illustration 22.8

High-Low Method
Total costs for 45,000 miles
Maintenance costs are therefore $8,000 per month of fixed costs
plus $1.10 per mile of variable costs. This is represented by the
following equation:
Example: At 45,000 miles, estimated maintenance costs would be:

Fixed $ 8,000
Variable ($1.10 × 45,000) 49,500
$57,500

High-Low Method
Scatter plot for Metro Transit Company
Illustration 22.9

High-Low Method
Review Question
Mixed costs consist of a:
a. Variable cost component and a fixed cost component.
b. Fixed cost component and a controllable cost component.
c. Relevant cost component and a controllable cost
component.
d. Variable cost component and a relevant cost component.

High-Low Method
Review Answer
Mixed costs consist of a:
a. Answer: Variable cost component and a fixed cost
component.
b. Fixed cost component and a controllable cost component.
c. Relevant cost component and a controllable cost
component.
d. Variable cost component and a relevant cost component.

DO IT! 2: High-Low Method
Byrnes Company accumulates the following data concerning a
mixed cost, using units produced as the activity level.
Units Produced Total Cost
March 9,800 $14,740
April 8,500 13,250
May 7,000 11,100
June 7,600 12,000
July 8,100 12,460
a) Compute the variable- and fixed-cost components using this method.

b) Using the information from your answer to part (a), write the cost
equation.
c) Estimate the total cost if the company produces 8,000 units.
Part (a) solution
March 9,800 $14,740
April 8,500 13,250
May 7,000 11,100
June 7,600 12,000
July 8,100 12,460
(a) Compute the variable- and fixed-cost components using this method.
($14,740  $11,100)
Variable cost: = $1.30 per unit
(9,800  7,000)
Fixed cost: $14,740 − $12,740 ($1.30 × 9,800 units) = $2,000

or $11,100 − $9,100 ($1.30 × 7,000) = $2,000

Part (b) solution
March 9,800 $14,740
April 8,500 13,250
May 7,000 11,100
June 7,600 12,000
July 8,100 12,460
b) Using the information from your answer to part (a), write the
cost equation.
Cost = $2,000 + ($1.30 × units produced)

Part (c) solution
March 9,800 $14,740
April 8,500 13,250
May 7,000 11,100
June 7,600 12,000
July 8,100 12,460
c) Estimate the total cost if the company produces 8,000 units.

Total cost (8,000 units):
$2,000 + $10,400 ($1.30 × 8,000) = $12,400

Cost-Volume-Profit Analysis
Prepare a CVP income statement to determine
contribution margin.
Cost-volume-profit (CVP) analysis is the study of the effects
of changes in costs and volume (quantity) on a company’s
profits.
• Important in profit planning.
• Critical factor in management decisions as
o Setting selling prices,
o Determining product mix, and
o Maximizing use of production facilities.

Basic Components
Illustration 22.10

Basic Components
Assumptions
1. Behavior of both costs and revenues is linear throughout
the relevant range of the activity index.
2. Costs can be classified accurately as either variable or
fixed.
3. Changes in activity are the only factors that affect costs.
4. All units produced are sold.
5. When more than one type of product is sold, the sales mix
will remain constant.

Basic Components
Review Question
Which of the following is not involved in CVP analysis?

a. Sales mix.
b. Unit selling prices.
c. Unit fixed costs.
d. Volume or level of activity.

Basic Components
Review Answer
Which of the following is not involved in CVP analysis?

a. Sales mix.
b. Unit selling prices.
c. Answer: Unit fixed costs.
d. Volume or level of activity.

CVP Income Statement
• A statement for internal use.
• Classifies costs as fixed or variable.
• Reports contribution margin in the body of the
statement.
o Contribution margin – amount of revenue remaining
after deducting variable costs.
• Reports the same net income as a traditional income
statement.

Assumed selling and cost data
Vargo Electronics Company produces cell phones. Relevant data for
the cell phones sold by this company in June 2022 are as follows.
Illustration 22.11

Illustration
The following illustration compares the traditional GAAP income
statement for Vargo Electronics versus its CVP income statement:
Illustration 22.12

Unit Contribution Margin
• Contribution margin is available to cover fixed costs and to
contribute to income.
• Equation for unit contribution margin and the computation
for Vargo Electronics are:
Illustration 22.13

Sales of 1,000 units
Vargo’s CVP income statement assuming a zero net income
(1,000 cell phones sold).
Illustration 22.14

Sales of 1,001 units
Assume that Vargo sold one more cell phone, for a total of
1,001 cell phones sold.
Illustration 22.15

Contribution Margin Ratio
• Shows the percentage of each sales dollar available to
apply toward fixed costs and profits.
• Equation for contribution margin ratio and the
computation for Vargo Electronics are:
Illustration 22.17

Contribution Margin Ratio
Comparative CVP income statements
Assume Vargo Electronics’ current sales are $500,000 and it wants
to know the effect of a $100,000 (200 units) increase in sales.
Illustration 22.18

Review Question
Contribution margin:
a. Is revenue remaining after deducting variable costs.
b. May be expressed as unit contribution margin.
c. Is selling price less cost of goods sold.
d. Both (a) and (b) above.

Review Answer
Contribution margin:
a. Is revenue remaining after deducting variable costs.
b. May be expressed as unit contribution margin.
c. Is selling price less cost of goods sold.
d. Answer: Both (a) and (b) above.

DO IT! 3: CVP Income Statement
Ampco Industries produces and sells a cell phone-operated

thermostat. Information regarding the costs and sales of
thermostats during September 2022 are provided below.
Unit selling price of thermostat $85
Unit variable costs $32
Total monthly fixed costs $190,000
Units sold 4,000
Prepare a CVP income statement for Ampco Industries for the

month of September. Provide total, per unit, and percent of sales.

DO IT! 3: CVP Income Statement
Solution
Prepare a CVP income statement for Ampco Industries for the
month of September. Provide total, per unit, and percent of
sales values.
Solution

Break-Even Analysis
Compute the break-even point using three approaches.
• Process of finding the break-even point level of activity at
which total revenues equal total costs (both fixed and
variable).
• Can be computed or derived
o from a mathematical equation,
o by using contribution margin techniques, or
o from a cost-volume-profit (CVP) graph.
• Expressed either in sales units (quantity) or in sales dollars.

Mathematical Equation
Break-even occurs where total sales equal variable costs

plus fixed costs; i.e., net income is zero.
Illustration 22.20
22.20
Computation of
break-even point
in sales units.

Contribution Margin Technique
• At the break-even point, contribution margin must

equal total fixed costs
(CM = total revenues – variable costs)
• Break-even point can be computed using either unit
contribution margin or contribution margin ratio.

Equation for break-even point in units
• When the break-even-point in sales units is desired,
unit contribution margin is used in the following
equation which shows the computation for Vargo
Electronics:
Illustration 22.21

Equation for break-even point in dollars
• When the break-even-point in sales dollars is desired,
contribution margin ratio is used in the following
equation which shows the computation for Vargo
Electronics:
Illustration 22.22

Graphic Presentation Method
CVP Graph
Illustration 22.23

Break-Even Analysis
Review Question
Gossen Company is planning to sell 200,000 pliers for $4 per
unit. The contribution margin ratio is 25%. If Gossen will
break even at this level of sales, what are the fixed costs?
a. $100,000.
b. $160,000.
c. $200,000.
d. $300,000.

Break-Even Analysis
Review Answer
Gossen Company is planning to sell 200,000 pliers for $4 per
unit. The contribution margin ratio is 25%. If Gossen will break
even at this level of sales, what are the fixed costs?
a. $100,000.
b. $160,000.
c. Answer: $200,000.
d. $300,000.

DO IT! 4: Break-Even Analysis
Mathematical equation
Lombardi Company has a unit selling price of $400, unit variable costs of
$240, and fixed costs of $180,000. Compute the break-even point in sales
units using (a) a mathematical equation and (b) unit contribution margin.

DO IT! 4: Break-Even Analysis
Unit contribution margin
Lombardi Company has a unit selling price of $400, unit variable

costs of $240, and fixed costs of $180,000. Compute the break-
even point in sales units using (a) a mathematical equation and
(b) unit contribution margin.

Target Net Income and Margin of Safety
Determine the sales required to earn target net income
and determine margin of safety.
Target Net Income
• Level of sales necessary to achieve a target income.
• Can be determined from each of the approaches used to
determine break-even sales/units:
o from a mathematical equation,
o by using contribution margin technique, or
o from a cost-volume-profit (CVP) graph.
• Expressed either in sales units or in sales dollars.

Target Net Income
Equation for required sales to meet target net income.
Illustration 22.24

Computation of required sales
Using the equation for the break-even point, simply include the
desired net income as a factor.
Illustration 22.25

Equation for sales in units
To determine the required sales units for Vargo Electronics:
Illustration 22.26

Equation for sales in dollars
To determine the required sales dollars for Vargo Electronics:
Illustration 22.27

Graphic Presentation Method
CVP Graph Revisited
CVP Graph
Illustration 22.23
Suppose Vargo Electronics
sells 1,400 cell phones.
Illustration 22.23 shows that
a vertical line drawn at 1,400
units intersects the sales line
at $700,000 and the total cost
line at $620,000. The
difference between the two
amounts represents the net
income (profit) of $80,000.
Target Net Income
Review Question
The mathematical equation for computing required sales to

obtain target net income is:
Required sales =
a. Variable costs + Target net income.
b. Variable costs + Fixed costs + Target net income.
c. Fixed costs + Target net income.
d. No correct answer is given.

Target Net Income
Review Answer
The mathematical equation for computing required sales to

obtain target net income is:
Required sales =
a. Variable costs + Target net income.
b. Answer: Variable costs + Fixed costs + Target net income.
c. Fixed costs + Target net income.
d. No correct answer is given.

Margin of Safety
Equation for margin of safety in dollars
• Difference between actual or expected sales and sales at
the break-even point.
• Measures the “cushion” that a particular level of sales
provides.
• May be expressed in dollars or as a ratio.
Assuming actual/expected sales are $750,000:

Illustration 22.28

Margin of Safety
Equation for margin of safety ratio
• Computed by dividing the margin of safety in dollars
by the actual (or expected) sales.
• Assuming actual/expected sales are $750,000:
Illustration 22.29
• The higher the dollars or percentage, the greater the

margin of safety.

Margin of Safety
Review Question
Marshall Company had actual sales of $600,000 when break-
even sales were $420,000. What is the margin of safety ratio?
a. 25%.
b. 30%.
c. 33⅓%.
d. 45%.

Margin of Safety
Review Answer
Marshall Company had actual sales of $600,000 when break-
even sales were $420,000. What is the margin of safety ratio?
a. 25%.
b. Answer: 30%.
c. 33⅓%.
d. 45%.

DO IT! 5: Break-Even Point, Margin of
Safety, and Target Net Income
Zootsuit Inc. makes travel bags that sell for $56 each. For the
coming year, management expects fixed costs to total
$320,000 and unit variable costs to be $42. Compute the
following:
a) break-even point in sales dollars using the contribution
margin (CM) ratio;
b) the margin of safety and margin of safety ratio assuming
actual sales are $1,382,400; and
c) the sales dollars required to earn net income of $410,000.

Break-even sales in dollars
coming year, management expects fixed costs to total $320,000
and unit variable costs to be $42. Compute break-even point in
sales dollars using the contribution margin (CM) ratio.
Contribution margin ratio = [($56 − $42) ÷ $56] = 25%
Break-even sales in dollars = $320,000 ÷ 25% = $1,280,000

Margin of safety and margin of safety ratio
and unit variable costs to be $42. Compute the margin of safety
and margin of safety ratio assuming actual sales are $1,382,400.
Margin of safety = $1,382,400 − $1,280,000 = $102,400

Margin of safety ratio = $102,400 ÷ $1,382,400 = 7.4%

Sales in dollars
and unit variable costs to be $42. Compute the sales dollars
required to earn net income of $410,000.
Required sales in dollars =

($320,000 + $410,000) ÷ 25% = $2,920,000

Regression Analysis
LEARNING OBJECTIVE *5A
Apply regression analysis to determine the components of
mixed costs.
• While the high-low method works well, a weakness is that

it employs only a few data points and ignores the rest.
• If those two data points are representative of the entire
data set, then the high-low method provides reasonable
results.
• If the high and low data points are not representative of
the rest of the data set, then the results are misleading.

High-Low Method
Maintenance costs and mileage data
Assume that Hanson Trucking Company has 12 months of
maintenance cost data, as shown.
Illustration 22.A2
• The high and low activities are 65,000 miles in December

and 15,000 miles in July.
• The maintenance costs at these two levels are $63,000
and $39,000, respectively.
High-Low Method
Computation of variable and fixed costs
Total variable cost = number of miles × cost per mile.

At the low activity level of 15,000 miles, total variable cost is $7,200
(15,000 × $0.48).
To determine fixed costs, subtract total variable costs at the low activity
level from the total cost at the low activity level.
Fixed costs = $39,000 − ($0.48 × 15,000) = $31,800

High-Low Method
Equation for variable and fixed costs
Therefore, the cost equation based on the high-low method

for this data produces the following calculation:

High-Low Method
Graphing variable and fixed costs
The following scatter plot of the data has a line representing

the high-low method cost equation:
Illustration 22.A3

High-Low Method
Reviewing the scatter plot
Note the following when reviewing the scatter plot:
• Most of the data points for Hanson Trucking are a significant
distance from the line.
• For example, at 19,000 miles, the observed maintenance cost is
$29,000, but the equation predicts $40,920 [$31,800 + ($0.48 ×
19,000)]. That is a difference of $11,920 ($40,920 − $29,000).
• In this case, the high-low method cost equation does not
provide a good representation of the actual relationship
between miles driven and maintenance costs.
To derive a more representative cost equation, the company should
employ regression analysis.

Regression Analysis
More precise estimates of the cost equation
• Regression analysis is a statistical approach that

estimates the cost equation by employing information
from all data points, not just the highest and lowest
ones.
• Regression analysis finds a cost equation that results in
a cost equation line that minimizes the sum of the
(squared) distances from the line to the data points.

Regression Analysis
Excel spreadsheet for Hanson Trucking Company
Illustration 5A.4 uses the Intercept and Slope functions in Excel to

estimate the regression equation for the Hanson Trucking Company
data.
Illustration 22.A4
Regression Analysis
Comparison to high-low cost equation
The resulting cost equation is:
Compare this to the high-low cost equation:

Regression Analysis
Scatter plot and cost equation lines
Illustration 5A.5 shows, the intercept and slope differ

significantly between the regression equation (green) and the
high-low equation (red).
Illustration 22.A5
Regression Analysis
Limitations
While regression analysis usually provides more reliable estimates
of the cost equation, it does have its limitations.
1. The regression approach applied assumes a linear relationship
between the variables. If the actual relationship differs
significantly from linearity, then linear regression can provide
misleading results.
2. Regression estimates can be severely influenced by “outliers”—
data points that differ significantly from the rest of the
observations.
3. Regression estimation is most accurate when it is based on a
large number of data points.

Copyright
Copyright © 2021 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Act without the express written permission of the
copyright owner is unlawful. Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies
for his/her own use only and not for distribution or resale. The Publisher assumes no
responsibility for errors, omissions, or damages, caused by the use of these programs or
from the use of the information contained herein.
Copyright ©2021 John Wiley & Sons, Inc. 89

Wey AP 14e PPT Ch22 Cost-Volume-Profit

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Wey AP 14e PPT Ch22 Cost-Volume-Profit

Uploaded by

Copyright:

Available Formats

Accounting Principles

Copyright ©2021 John Wiley & Sons, Inc.

Copyright ©2021 John Wiley & Sons, Inc. 2

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 3

• Many companies use more than one measurement

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 4

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 5

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 6

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 7

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 8

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 9

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 10

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 11

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 12

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 13

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 14

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 15

• Throughout the range of possible levels of activity, a

• For fixed costs, the relationship Helpful Hint

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 16

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 17

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 18

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 19

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 20

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 21

Helena Company reports the following total costs at two

LO 1 Copyright ©2021 John Wiley & Sons, Inc. 22

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 23

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 24

Metro Transit Company has the following maintenance costs and

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 25

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 26

Example: At 45,000 miles, estimated maintenance costs would be:

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 27

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 28

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 29

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 30

a) Compute the variable- and fixed-cost components using this method.

Fixed cost: $14,740 − $12,740 ($1.30 × 9,800 units) = $2,000

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 32

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 33

c) Estimate the total cost if the company produces 8,000 units.

LO 2 Copyright ©2021 John Wiley & Sons, Inc. 34

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 35

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 36

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 37

Which of the following is not involved in CVP analysis?

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 38

Which of the following is not involved in CVP analysis?

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 39

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 40

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 41

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 42

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 43

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 44

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 45

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 46

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 47

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 48

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 49

Ampco Industries produces and sells a cell phone-operated

Prepare a CVP income statement for Ampco Industries for the

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 50

LO 3 Copyright ©2021 John Wiley & Sons, Inc. 51