22. CVP Analysis orporation has $8,000 in fixed costs, Each unit uses $14 in dir
ID: 2428381 • Letter: 2
Question
22. CVP Analysis orporation has $8,000 in fixed costs, Each unit uses $14 in direct materials, $19 in direct labor, and $2 in variable many does XYZ need to sell in order to breakeven ble manufacturing overhead. Each unit sells for $50. How ANSWER: Compary pays $30,000 a month in rent, $2000 a month in insurance, $1500 a in utilitics, and $100 per unit in sales commissions. Product costs include $1500 a b. Gulpa?otis month month for depreciation on factory eq unit for direct labor, and $5000 per month salary for the production manager. The selling price per unit is S200. The flat tax rate is 40% How many units do they need to sell in order to achieve an after-tax profit of $60,0002 uipment, $10 per unit for direct materials, $15 per ANSWER: Bob Smith is studying a report from corporate headquarters concerning his department's weekly production of 10,000 cans of dog food, their only product. The report states that his department achieved $20,000 $3000 in fixed costs. What was the variable cost per unit for each can of dog food? c. in revenues, achieved a profit of $2000, and co ANSWER:Explanation / Answer
1.
Selling price per unit
$50
Less: Variable cost
Direct material
$14
Direct labor
$19
Variable manufacture overhead
$2
Total variable cost
$35
Contribution margin per unit
$15
Breakeven sales in units = Fixed cost/Contribution margin per unit
= $ 8,000/$ 15 = 533.33 or 534 units
XYZ needs 534 units to breakeven.
2.
After tax profit = $ 60,000
Gross profit = after tax profit/ (1 - tax rate)
= $ 60,000/ (1 - 0.4) = $ 60,000/0.6 = $ 100,000
Computation of unit CM:
Selling price per unit
$200
Less: Variable cost
Direct material
$10
Direct labor
$15
Sales commission
$100
Total variable cost
$125
Contribution margin per unit
$75
Computation of Total fixed cost:
Rent
$30,000
Add: Insurance
$2,000
Add: Utilities
$1,500
Add: Depreciation
$1,500
Add: Salary of production Manager
$5,000
Total fixed cost
$40,000
Desired sales for $100,000 profit = (Fixed Cost+ Target Profit)/ Contribution margin per Unit
= ($ 40,000 + $ 100,000)/$ 75
= $ 140,000 / $ 75
= 1,866.667 or 1,867 units
3.
Profit = Total contribution – Fixed cost
Profit = Sales revenue – Total variable cost – Fixed cost
Total variable cost = Sales revenue – Fixed cost – Profit
Variable cost per unit = Total variable cost/No. of units
Sales revenue
$20,000
Less: Fixed cost
$ 3,000
Less: Profit
$ 2,000
Total variable cost
$15,000
÷No. of units
$10,000
Variable cost per unit
$1.50
Variable cost per unit for each can of dog food is $ 1.50
Selling price per unit
$50
Less: Variable cost
Direct material
$14
Direct labor
$19
Variable manufacture overhead
$2
Total variable cost
$35
Contribution margin per unit
$15
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