EXERCISE 4-12. CVP Analysis, Profit Equation [LO 3] Clyde’s Marina has estimated

Question

EXERCISE 4-12. CVP Analysis, Profit Equation [LO 3] Clyde’s Marina has estimated that fixed costs per month are $300,000 and variable cost per dollar of sales is $0.40.
Required
a. What is the break-even point per month in sales dollars?
b. What level of sales dollars is needed for a monthly profit of $60,000?
c. For the month of July, the marina anticipates sales of $1,000,000. What is the expected level
of profit?


EXERCISE 4-13. Contribution Margin [LO 3] Rhetorix, Inc. produces stereo speakers.The selling price per pair of speakers is $900. The variable cost of production is $300 and the fixed cost per month is $60,000.
Required
a. Calculate the contribution margin associated with a pair of speakers.
b. In August, the company sold six more pairs of speakers than planned.What is the expected
effect on profit of selling the additional speakers?
c. Calculate the contribution margin ratio for Rhetorix associated with a pair of speakers.
(Round to 2 decimal places.)
d. In October, the company had sales that were $7,000 higher than planned.What is the
expected effect on profit related to the additional sales? (Round to the nearest dollar.)

Explanation / Answer

300,000/(1-.40)= 500,000 (300,000+60,000)(1-.40)= 600,000 1,000,000*(1-.4) -300,000= 300,000 900-300=600 6(900-300)= 3,600 (900-300)/900= 66.67% 7,000*.6667= 4,667

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