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Assignment 2 (CVP Analysis Solutions)


Tauseef Ahmed Qureshi

Problem No 1
Commission (SP) = $ 80 ( 8% commission of ticket price)
VC = $ 35 ( $18 Delivery char5ges + $17 Misc cost)
FC = $ 22,000 per month.
UCM = $ 80 - $ 35 = $ 45
1. (a) BEP = $22,000 $45 = 489 tickets
(b) Qty = ( $22,000 + $10,000) $45 = 712 tickets
2. Delivery charges changes to $12 per ticket
New VC = $12 + $17 = $29
UCM = 80 29 = $51
(a) BEP = $22,000 $51 = 432 tickets
(b) Qty = ( $22,000 + $10,000) $51 = 628 tickets
3. CA changes its commission structure. Up to ticket price $600 8 %
comm.. For tickets 600
$48 fixed
New UCM = $48 29 = $19
(a) BEP = $22,000 $19 = 1158 tickets
(b) Qty = ( $22,000 + $10,000) $19 = 1685 tickets
Problem No 2
SP = $ 30
VC = $19.5 + 1.50 = $21
UCM = 30 -21 =
$9
FC = 60,000+200,000+80,000+20,000 = $360,000
1.
(a) BEP = $360,000 $9 = 40,000 pairs
(b) 40,000 $30 = $ 1,200,000
2. Operating income = (35,000 $30) (35,000 $21) - $360,000
= $ (4,500)
3. FC = 360,000 + 81,000 = $441,000 VC = $19.50 UCM = 30 19.5
= $10.50
BEP = 441,000 10.50 = 42,000 pairs
4. FC = 360,000
VC = 21 + 0.30 = $21.30
UCM = 30
21.30 = $ 8.70
BEP = 360,000 8.7 = 41,380 pairs
$30 = $ 1,241,400.

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5. BEP = 40,000 pairs as (1)
OI=(50,000 $30) (50,000 $19.50) (50,000 1.5) (10,000
0.30) - $360,000
= $ 87,000
Problem No 3
FC = 4000+3000+2000+1000+3000+2000 = $15,000
VC = $25 (meals &drinks) + 35 (binder and photocopy)
SP = $260
UCM = 260 -60 = $200
1. (a) BEP = 15,000 200 = 75 attendees
(b) FC = 15,000 3000-2,000 = $ 10,000
BEP = 10,000 200 = 50 attendees
2. OI = $260 N - $60 N - $10,000
1997
%
1998
%
1999
%

N=60 OI = 15,600 -3,600 -10,000


= $2,000
$1,000
N=90 OI = 23,400 -5,400 -10,000
= $8,000
$4,000
N=180 OI = 46,800 -10,800 -10,000 = $26,000
$13,000

50
50
50

Problem No 4
1.

Let Q = Number of units of Deluxe product to BE


Let 3Q = Number of units of Standard product to BE
Revenue VC FC = OI
(3Q $20 + Q 30) (3Q $14 + Q $18) -1,200,000 = 0
30 Q = $1,200,000
Q = 40,000 units of Deluxe
3Q = 120,000 units of Standard

2. UCM ( Std) = 20 14 = $ 6
UCM ( Deluxe) = 30 18 = $ 12
If only Std are sold BE = 1,200,000 6 = 200,000 units
If only Deluxe are sold BE = 1,200,000 12 = 100,000 units
3. OI = 180,000$6 + 20,000 12 1,200,000 = $120,000
4.

Let Q = Number of units of Deluxe product to BE


Let 9Q = Number of units of Standard product to BE
Revenue VC FC = OI

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(9Q $20 + Q 30) (9Q $14 + Q $18) -1,200,000 = 0
Q = 18,182 (Deluxe)
9Q = 18,182 9 = 163,638 (Standard)
BEP = 163,638+18,182 = 181,820 units
Problem No 5
Evenflo (infant car)

CM = 50-30 = $ 30
FC = $ 495,000

1. BEP Year 2000 = 495,000 30 = 16,500 units


2. Ridex (infant car)
CM = 25-15 = $ 10
Evenkeel expects to sell 3 units of Evenflo to 2 units of Ridex
CM for bundled produces = $303 + $102 = $110
Sales for bundled products = $503 + $252 = $200
BEP = 495,000 110 = 4,500 bundled
Evenflo = 4,500 3 = 13,500 units $50 = 675,000
Ridex = 4,500 2 = 9,000 units $25 =
225,000
3. CM % in 2,000 = $30 $ 50 = 60%
CM % in 2,001 = $100 $ 220 = 55%
BEP in year2001 increases because FC are same in both years.
But the CM generated by each dollar of sales revenue at the
given product mix decreases in 2001 relative to year 2000.
Problem No 6
1.

2.
3.

OI = Rev VC FC
= 500,000 ( 20,00013.75) 135,000= $90,000
= 90,000(90,0000.4) = $54,000
BEP= 270,000 (25-13.75) = 24,000 Units
NI = Rev VC FC
X 0.6 = 550,000 (22,00013.75) (135,000+11,250)
OI = $60,750

4.

BEP= 146,250 (25-13.75) = 13,000 Units

5.

25Q 13.75Q (135,000+11,250) = 54,000


Q = 21,000 units

Revenue = 21,000 $25 = $525,000

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6.

(2200025) (22,00013.75) (135,000 + X ) = 6-0,000 10.4


X = $125,000

Problem No 7
SP = $ 8.00
A. Total Sales = 240,000+40,000+120,000 = 400,000
%
60%
10%
30%
100%
CM % = (240,000 -180,000) 240,000 = 0.25 $8.00 = $2.00
CM % = (40,000 -20,000) 40,000
= 0.5 $8.00 = $4.00
CM % = (120,000 -96,000) 120,000 = 0.2 $8.00 = $1.60
Weighted Average CM = 0.60 $2 + 0.10 $34 + 0.30 $1.60
= $ 2.08
BEP = $74,880 2.08 = 36,000 units
36,000$8 = $288,000
B. R
S
T

36,000 60% = 21,600 $8 = 172,800


36,000 10% = 3,600 $8 = 28,800
36,000 30% = 10,800 $8 = 84,400

C. Weighted Average CM = 0.30 $2 + 0.40 $4 + 0.30 $1.60


= $2.68
BEP = 80,400 2.68 = 30,000 units $8 = $240,000
R
S
T

30,000 30% = 9,000 $8 = 72,000


30,000 40% = 12,000 $8 = 96,000
30,000 30% = 9,000 $8 = 72,000

Problem No 8 ( Check)
Case 1
CM Income Statement
Revenue
V.Cost of goods sold:
DM ( beg)
Purchased
DM(End)

$100,000
12,000
15,000
(5,000)
DM Used

DL
V. Manufacturing

22,000 (H)
30,000
5,000

V. Marketing and Admin

13,000 (K)

overhead
costs
Total Variable costs
Contribution Margin
Fixed Costs:
Fixed manufacturing overhead
Fixed. Marketing & Admin
Total Fixed costs
Operating Income (loss)
BEP = FC CM %

70,000
30,000
13,000(I)
7,000(J)
20,000
$10,000

66,667 = FC 0.30

FC= $ 20,000

Conventional Income Statement


Revenue
Cost of goods sold:
DM used
DL
V. Manufacturing
overhead
F. Manufacturing
overhead
Cost of goods manufactured
Gross Margin

$100,000
22,000
30,000
5,000
18,000(I)
75,000(G)
25,000

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Operating expenses:
V. Marketing and Admin
costs
F. Marketing & Admin
Total Operating expenses
Operating income
Case 2

13,000
7,000(J)
20,000
$5,000

CM Income Statement
Revenue
V.Cost of goods sold:
DM ( beg)
Purchased
DM(End)
DM Used
DL
V. Manufacturing
overhead
V. Marketing and Admin
costs
Total Variable costs
Contribution Margin
Fixed Costs:
Fixed manufacturing overhead
Fixed. Marketing & Admin
Total Fixed costs
Operating Income (loss)
BEP = FC CM %

66,667 = FC 0.30

Conventional Income Statement


Revenue
Cost of goods sold:
DM used
DL
V. Manufacturing
overhead
F. Manufacturing
overhead
Cost of goods manufactured
Gross Margin
Operating expenses:

FC= $ 20,000

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V. Marketing and Admin
costs
F. Marketing & Admin
Total Operating expenses
Operating income