Cost Volume Profit Analysis
Managerial AccountingManagers must understand the cost of operating a business:
Two categories of costs:
Product Costs -Merchandising business
Inventory purchasesManufacturing business
Direct materialsDirect laborManufacturing overhead
Period costs - selling and administrative
Volume: The number of units of goods purchased or produced and how many units are sold.
Simplifying Assumption: The amount of or number of units we produce or purchase will be the same as the number we sell.
The Behavior of Costs with Changes in Volume
Variable CostsFixed Costs
Understanding how your costs behave with changes in volume allows management to understand the effect on profits given changes in volume.
CVP Analysis
Cost-Volume-Profit Analysis
Introduction to CVP Analysis
Page 1 of 1
Variable Cost: A cost that varies in total with changes in volume but are fixed per unit.
Total Variable Costs
Tota
l Dire
ct M
ater
ial C
osts
Volume (# Units Sold)
$ 80,000
0 1,000 2,000 3,000 4,000
$ 60,000$ 40,000$ 20,000
$ 0
Variable Cost Per Unit
Volume (# Units Sold)
Slope = VC per UnitSlope = rise/run
Dire
ct M
ater
ial C
osts
Per
Uni
t
$20,0001,000
$201
$ 40
0 1,000 2,000 3,000 4,000
$ 30$ 20$ 10$ 0
Other Examples of Variable Costs:
Direct LaborSales Commissions
infinity
0Volume (# Units Sold)
Tota
l Dire
ct M
ater
ial C
osts
$0infinity
Relative Range: The range of volume that is reasonably anticipated for operations.
Within the relative range, the slope of the variable cost line is assumed to be linear, or in other words, the VC per unit is assumed to be constant.
Variable Costs
Slope of line = V/C per unit
400,000 600,000
RelevantRange
Variable Costs
Page 1 of 1
Real World Fixed Costs
Tota
l Ren
tal C
osts
/mon
th $30,000
$20,000
$10,000
0 400,000 600,000 infinity
Volume (# units produced/sold per month)
Within the Revelant Range, a fixed cost is assumed to be fixed throughout that range of volume.
RelevantRange
Fixed Costs
Tota
l Ren
tal C
osts
/mon
th
$ 80,000$ 60,000$ 40,000$ 20,000
$ 0
Volume (# Units Sold)
Fixed Costs Per Unit
Volume (# Units Sold)
Ren
tal c
osts
per
uni
t
$ 0
$ 2
$ 4
$ 6
$ 8
$ 1
$ 3
$ 5
$ 7
0 1,000 2,000 3,000 4,000 5,000 6,000500
0 1,000 2,000 3,000 4,000 5,000 6,000
Fixed Costs: Costs which are fixed or constant regardless of changes in volume, but vary per unit.
Fixed Costs
Page 1 of 1
$200,000
$160,000
$120,000
$80,000
$40,000
$010,0000 20,000 30,000 40,000 50,000To
tal S
uper
viso
r Sal
arie
s/ye
ar
Volume (# units sold) per year
Stepped Costs Mixed Costs:(Costs which have a fixed and variable portion)
$6,000$5,000
$4,000$3,000$2,000
$0$10,000$0 $20,000 $30,000 $40,000 $50,000
$1,000
Tota
l Ren
tal C
osts
/Mon
th
Volume in sales revenues ($) per month
Slope = VC/Unit$1,000$10,000 = $.10 = 10%
Intersection = Total Fixed Cost Portion
Example: Management believes its utility costs are mixed in their behavior with changes in volume. Given the data below for the last six months of operations, determine if utility costs are indeed mixed, and, if so, calculate the variable and fixed cost components using first the scattergraph method and then the high-low method.
MonthJan.Feb.Mar.Apr.MayJune
# Units Produced10,000 7,00015,000 8,00013,00012,000
Utility Costs$17,000$14,000$24,000$15,000$20,000$18,000
Stepped and Mixed Costs
Page 1 of 2
High-Low Method
$25,000$20,000$15,000$10,000
$5,000$0
0
Tota
lUtil
ityC
ost
Volume in Thousands (# of Units Produced)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
VC per unit = Slope =
slope = VC per unit = $1.25 per unit
Fixed CostComponent
= $1.25 per unit
(Jan. $17,000/10,000)(Feb. $14,000/7,000)
(Mar. $24,000/15,000)
(Apr. $15,000/8,000) (May $20,000/13,000)(June $18,000/12,000)
$10,0008,000
Analysis of Mixed CostsWhat portion is fixed and what portion is variable?
1. Scattergraph or Visual-Fit Method2. High-Low Method3. Least Square Method
Total Utility Costs = Variable Costs + Fixed Costs
$24,000 = ($1.40 x 15,000) + FC$24,000 = $21,000 + $3,000
$0$5,000
$10,000$15,000$20,000$25,000
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Scattergraph Method
Tota
l Util
ity C
ost
$3,000
Volume in Thousands (# of Units Produced)
Fixed Cost Component VC/Unit
(Mar. $24,000/15,000)
(Feb. $14,000/7,000)
(Apr. $15,000/8,000) (May $20,000/13,000)(June $18,000/12,000)
(Jan. $17,000/10,000)
Slope = Rise/Run = = $1.40$7,0005,000
High-Low Method
$25,000$20,000$15,000$10,000
$5,000$0
0
Tota
lUtil
ityC
ost
Volume in thousands (# of units produced)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Total Cost = Variable Cost + Fixed CostAt High Point:
$24,000 = ($1.25 15,000) + FC$24,000 = $18,750 + FC
$24,000 - $18,750 = FC $5,250 = FC
.
slope = VC per unit = $1.25 per unit
Fixed CostComponent = $5,250 (Jan. $17,000/10,000)
(Feb. $14,000/7,000)
(Mar. $24,000/15,000)
(Apr. $15,000/8,000) (May $20,000/13,000)(June $18,000/12,000)
High-Low Method
$25,000$20,000$15,000$10,000
$5,000$0
0
Tota
lUtil
ityC
ost
Volume in thousands (# of units produced)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Total Cost = Variable Cost + Fixed CostAt Low Point:
$14,000 = ($1.25 x 7,000) + FC$14,000 = $8,750 + FC
$14,000 - $8,750 = FC $5,250 = FC
slope = VC per unit = $1.25 per unit
Fixed CostComponent
(Jan. $17,000/10,000)(Feb. $14,000/7,000)
(Mar. $24,000/15,000)
(Apr. $15,000/8,000) (May $20,000/13,000)(June $18,000/12,000)
= $5,250
Stepped and Mixed Costs
Page 2 of 2
If over the last year, the two months of highest and lowest production volume were April and August, respectively, and the cost of manufacturing supplies in those two months were as follows:
Calculate the fixed cost and variable cost per unit portion of the supplies cost if it is in fact a mixed cost.
What would be the anticipated manufacturing supplies cost in a month where a volume of 20,000 units was projected?
Describe the scattergraph approach to determine the fixed and variable cost per unit components of a mixed cost and explain why it is probably preferable to the method used above.
a.
b.
c.
April
Volume/Units Manufacturing Supplies
$9,00014,000 $12,00026,000
August
$480,000$440,000$400,000$360,000$320,000$280,000$240,000$200,000$160,000$120,000
$80,000$40,000
$0
Tota
lCos
ts&
Tota
lRev
enue
sPer
Mon
th
0 1 2 3 4 5 6Volume in Thousands (# of Units Produced and Sold)
CVP or Breakeven Analysis
Breakeven Point:Sales Revenues - Variable Costs - Fixed Costs = 0
$160,000 - $40,000 - $120,000 = 0($80 x 2,000) - ($20 x 2,000) - $120,000 = 0
Sales Revenues
Total CostSlope = Variable Cost
= $20 per unit
Slope = Sales Priceper unit
=$160,0002,000
$801
= $80
($80 x 1,000) - ($20 x 1,000) - $120,000 =
$480,000$440,000$400,000$360,000$320,000$280,000$240,000$200,000$160,000$120,000
$80,000$40,000
$0
0 1 2 3 4 5 6Tota
lCos
ts&
Tota
lRev
enue
sPer
Mon
th
Volume in Thousands (# of Units Produced)
Calculating Profit/Loss Graphically
Calculating profit at 1,000 units of volume:Sales Revenues - Variable Costs - Fixed Costs = Net Income
$80,000 - $20,000 - $120,000 = ($60,000)?
Sales RevenuesSlope = 80/1Sales Price = $80
per unit
Total CostSlope = 20/1Variable Cost = $20
per unit
$140,000
Loss = $60,000
Which of the following are true statements?
Fixed costs per unit decrease with increases in volume.
Variable costs per unit are assumed to be fixed within the relevant range.
Direct labor costs are typically a variable cost.
Mixed costs are costs that have both a fixed and variable component.
CVP Analysis requires all costs (product and period) to be distinguished as perfectly variable or perfectly fixed within the relevant range.
a.
b.
c.
d.
e.
($80 x 4,000) - ($20 x 4,000) - $120,000 =
$480,000$440,000$400,000$360,000$320,000$280,000$240,000$200,000$160,000$120,000
$80,000$40,000
$0
0 1 2 3 4 5 6Tota
lCos
ts&
Tota
lRev
enue
sPer
Mon
th
Volume in Thousands (# of Units Produced)
Calculating Profit/Loss Graphically
Calculating profit at 4,000 units of volume:Sales Revenues - Variable Costs - Fixed Costs = Net Income
$320,000 - $80,000 - $120,000 = $120,000?
Sales RevenuesSlope = 80/1Sales Price = $80
per unit
Total CostSlope = 20/1Variable Cost = $20
per unit
Profit = $120,000
Which of the following are true statements?
Fixed costs per unit decrease with increases in volume.
Variable costs per unit are assumed to be fixed within the relevant range.
Direct labor costs are typically a variable cost.
Mixed costs are costs that have both a fixed and variable component.
CVP Analysis requires all costs (product and period) to be distinguished as perfectly variable or perfectly fixed within the relevant range.
a.
b.
c.
d.
e.
True
True
True
True
True
Solution: Questions Problem: Mixed Cost Analysis
Approaches to CVP Analysis
Problem: Questions
Page 1 of 3
Given the graph presented below provide responses to the following:
$200,000$180,000$160,000$140,000$120,000$100,000
$80,000$60,000$40,000$20,000
$0
0 1 2 3 4 5 6Volume in Thousands (# Units Sold)
Tota
l Sal
es R
even
ues &
Tot
al C
osts
7 8
AB
Calculate the variable cost per unit.Determine the breakeven point in sales dollars and number of units.Determine the total variable costs at a volume of 5,000 units.Determine the net income (loss) at a volume of 2,000 units.
e.f.g.h.
What does line A represent?Line A represents total sales revenues.
Calculate the sales price per unit.Sales price per unit equals the slope of line A.
What does line B represent?Line B represents total costs.
Determine the amount of total fixed costs.Fixed costs equal $80,000, the point of intersection of the total cost line with the vertical axis.
$80,0002,000
$401= = $40
a.
b.
c.
d.
Calculate the fixed cost and variable cost per unit portion of the supplies cost if it is in fact a mixed cost.
a.
Mixed Cost Calculations for Manufacturing SuppliesVariable Cost Per Unit = Slope of Line
Total Costs = Variable Costs + Fixed Costs
RiseRun
$3,00012,000= = $ .25 per unit
At High Point in Volume:$12,000 = ($.25 x 26,000) + FC$12,000 = $6,500 + FC $5,500 = FC
At Low Point in Volume: $9,000 = ($.25 x 14,000) + FC $9,000 = $3,500 + FC $5,500 = FC
TC = VC + FC
TC = ($.25 x 20,000) + $5,500
$10,500 = $5,000 + $5,500
What would be the anticipated manufacturing supplies cost in a month where a volume of 20,000 units was projected?
b.
The scattergraph method identifies each monthly amount of production volume and related cost on a graph. A line is drawn to best fit the resulting relationship between cost and volume. The slope of this line is then calculated and represents the variable cost per unit. The intersection of the line with the vertical (cost) axis of the graph is the fixed cost portion.
The scattergraph may prove a better approximation of the amount of fixed and variable cost per unit components of a mixed cost because more than just two months of data is considered in the approach.
c.
Given the graph presented below provide responses to the following:
$200,000$180,000$160,000$140,000$120,000$100,000
$80,000$60,000$40,000$20,000
$0
0 1 2 3 4 5 6Volume in Thousands (# Units Sold)
Tota
l Sal
es R
even
ues &
Tot
al C
osts
7 8
AB
What does line A represent?Calculate the sales price per unit.What does line B represent?Determine the amount of total fixed costs.
a.b.c.d.
Solution: Breakeven Graph Problem: Breakeven Graph
Problem: Breakeven Graph
Approaches to CVP Analysis
Page 2 of 3
Solution: Mixed Cost Analysis Solution: Mixed Cost Analysis
Solution: Mixed Cost Analysis
Calculate the variable cost per unit.Variable cost per unit equals the slope of line B.
Determine the breakeven point in sales dollars and number of units.3,000 units or $120,000 of sales revenues.
Determine the total variable costs at a volume of 5,000 units.VC per unit = $13.33$13.33 x 5,000 units = $66,667
Determine the net income (loss) at a volume of 2,000 units.
$120,000 - $80,0003,000 - 0
$40,0003,000= = $13.33
e.
f.
g.
h.
SR - VC - FC = NI($40 x 2,000) - ($13.33 x 2,000) - $80,000 = NI
$80,000 - $26,667 - $80,000 = ($26,667)
Approaches to CVP AnalysisSolution: Breakeven Graph
Page 3 of 3
Example: Calculate the amount of sales revenues at breakeven given the following information for last year:
Sales Revenues Net Income CM Ratio
SR - FC - VCCM - FC
CF)RS oitaR MC(FC.25X
$350,000$50,000
--
25%
= NI= NI= $0= $0
.
First, calculate FC at a different level of volume:
(.25 $350,000)FC = NI CM
FC FC = $50,000
= $50,000 $87,500$87,500 $50,000 = FC
= FC$37,500
----
.
GAAP Income Statement Format
Contribution Margin Format Income Statement
Sales RevenuesLess: Total Variable Costs Contribution MarginLess: Total Fixed Costs Operating Income
Sales RevenuesLess: Cost of Goods Sold Gross MarginLess: Selling & Administrative Expenses Operating Income
$1,000,000 600,000 400,000
350,000$ 50,000
$1,000,000700,000300,000250,000
$ 50,000
CVP analysis can be used with historical information or prospective budgeted information to respond to the following kinds of questions:
CVP Analysis
How many units did we need to sell last year or do we need to sell next year in order to simply breakeven?
How many units did we need to sell last year or do we need to sell next year to generate a certain target net income?
What effect would changes in sales price, costs, or volume have on net income?
.
.
.
An Equational Approach to CVP Analysis
Basic Equation:-
$100,000
= NI
$ 000,06 $25,000 = $15,000
$25,000 = $15,000
FC
FC NI=$25,000 = $15,000
($10 10,000).
SR
.(SP/Unit # Units)
VC
($6 10,000).(VC/Unit # Units).
---
(VC Ratio SR).(60% $100,000).
--
--
-
(40% $100,000).
CM$40,000
(CM/Unit # Units).($4 10,000).
(CM Ratio SR).CM as % SR or
Example: Given the following information, determine the sales price per unit required at an anticipated sales volume of 10,000 units to achieve net income of $100,000:
Fixed CostsVC Ratio
$25,000
SR FC = NI(70% SP/Unit # Units Sold)
10,000X --
25,00025,00025,0003,000X
= 100,000= 100,000= 100,000
3,000X = 125,0003,000 3,000
X = $41.67per unit
(.70 10,000X)7,000X
VC 25,000 = 100,000
10,000X
(SP/Unit # Units Sold)
-----
--
. ...
70%
Contribution Margin and CVP Practice
Page 1 of 2
$37,500
.25X.25
$37,500.25
$150,000
=
CF.25X
--
= $0= $0
=
(CM Ratio SR).
X
Then insert fixed cost of $37,500 into the original equation, and solve for X.
a. Calculate the breakeven volume in number of units given the following information:
10X - 7X - 39,000 = 0
SR - VC - FC = NI
Fixed costsVariable cost ratioSales price per unit
$39,000 70%
$10
X = 13,000 units
3X = 39,0003 3
b. Calculate the contribution margin per unit given the following information:
Contribution margin per unit:Sales price/unit - Variable cost/unit
OR...
SR - VC - FC = NI
25,000X = 225,00025,000 25,000
25,000X - 175,000 - 50,000 = 0
= $9 sales price per unit
X
$9 - $7 = $2
Breakeven volume 25,000 unitsFixed costs $50,000Variable cost per unit $7
b. Calculate the contribution margin per unit given the following information:
- FC = NISR - VCCM - FC = NI
- FC = 0CM/unit #units sold.
= 50,00025,000
25,000X25,000
= $2 contribution margin per unit
X
-25,000X 50,000 = 0
Breakeven volume 25,000 unitsFixed costs $50,000Variable cost per unit $7
Solve the following problems using the equational approach to CVP analysis:a.
b.
c.
Calculate the breakeven volume in number of units given the following information:Fixed costsVariable cost ratioSales price per unit
Calculate the contribution margin per unit given the following information:Breakeven volumeFixed costsVariable cost per unit
How many units must be sold at $20/unit to generate net income of $100,000 given the following:Fixed costsContribution margin ratio
$39,00070%
$10
25,000 units$50,000
$7
$40,00060%
Fixed costs $40,000Contribution margin ratio 60%
c. How many units must be sold at $20/unit to generate net income of $100,000 given the following:
12X - 40,000 = 100,000
=12X12
140,00012
X = 11,667 units rounded
CM - FC = NI
- FC = 100,000(.60 $20 #units sold). .
- FC = NISR - VC
Contribution Margin and CVP PracticeProblem: CVP Solution: CVP
Solution: CVP
Solution: CVP
Solution: CVP
Page 2 of 2
ii. Calculate the breakeven point in sales revenues.Sales Revenues
(SP/unit # units sold)$100 400 = $40,000.
.
A.
i. Calculate the breakeven point in # of units.
Given the following:Sales revenues# of units soldFixed costsNet income
$100,000 1,000 units $20,000 $30,000
($100/unit)
=X 400
=50X50
20,00050
50 = 20,000- 20,000 = 050
- - 20,000 = 0100 50- VC - FC = NISR
B. Given the following:Variable cost ratioFixed costs
Calculate the breakeven sales revenue.
65% 007,41$
SRX
--
.35X
VC.65X
---
FC14,70014,700.35X.35X.35X
====
=
=
NI00
14,70014,700
.35$42,000
C.
Calculate the # of units which must be sold to produce net income of $20,000.
First, you must determine the amount of fixed costs at breakeven:
NI=FC--SR VC0=FC--500,000 .(60% 500,000)0=FC--500,000 300,000
FC=200,000
Given the following:Breakeven Sales RevenuesContribution Margin RatioSales Price pre UnitContribution Margin per UnitVariable Cost per UnitVariable Cost Ratio
$500,000 40%
$100 $40 $60
60%
A. Given the following:Sales Revenues ($100/unit)# of Units SoldFixed CostsNet Income
i. Calculate the breakeven point in # of units.ii. Calculate the breakeven point in sales revenues.
$100,0001,000 units
$20,000$30,000
A.
B. Given the following:Variable Cost RatioFixed Costs
Calculate the breakeven Sales Revenue.
65%$14,700
C. Given the following:Breakeven Sales RevenuesContribution Margin RatioSales Price pre UnitContribution Margin per UnitVariable Cost per UnitVariable Cost Ratio
Calculate the # of units which must be sold to produce net income of $20,000.
$500,00040%$100
$40$60
60%
Then solve the problem:
Calculate the # of units which must be sold to produce net income of $20,000.
5,500 units
220,00020,00020,000
NI
220,00040
=
====
=
X
40X200,000200,000
FC
40X40
---
60XVC
40X--
100XSR
More Practice with CVPProblem: CVP Analysis
Solution: CVP Analysis
Solution: CVP Analysis
Solution: CVP Analysis
Solution: CVP Analysis
Problem: CVP Analysis
Page 1 of 3
In order to produce any plastic product through an injection molding process (i.e., plastic cups, kitchen utensils or even a plastic jello mold) a metal production mold created from a prototype of the given product must first be manufactured. Assume the cost of creating one production mold of the Salt Lake Temple is $20,000 and such a mold would be capable of producing a maximum of approximately 200,000 jello molds with no salvage value. Depreciation of the $20,000 production mold development costs are to be calculated based on the units of production method. At this time Heber plans to produce only temple jello molds.
Workman’s compensation insurance 10% of direct labor costsbefore payroll taxes
Utilities (80% of total fixed utility costs are manufacturing related and 20% due to selling and administrative office space)
$200 per month plus $.05 per unit produced
Building rent (2,000 total sq. ft. of which 80% of the building space will be for manufacturing and 20% for selling and administrative purposes)
$.70 per sq. ft. per month
Selling and administrative costs are projected as follows:
Heber plans to administer and manage the business and does not plan to pay himself a salary until the business can afford it.
Building Rent (see above)
Utilities (see above)
Telephones, fax
Copy machine rent, paper and other
Other office supplies
General liability insurance
Sales commissions to manufacturer’s sales representative
Accounting services
$300 per month
$250 per month
$150 per month
$.10 per unit sold
$50 per month
$500 per month
Required: PART 1: CVP ANALYSIS
1.
2.
3.
4.
Show the detail and totals of the following anticipated costs:A. Manufacturing (Product) Costs
1. Variable cost per unit (including direct materials, laborand mfg. overhead)
2. Fixed costs per monthB. Selling and Administrative (Period) Costs
1. Variable costs per unit2. Fixed costs per month
Determine the # of jello molds that would have to be sold in any month to simply breakeven.Determine the # of jello molds that would have to be sold in any month in order to provide Heber with a profit of $2,000 for the month.Calculate the sales price per unit that must be charged if Heber wishes to generate a monthly profit of at least $3,000 at a sales volume of 4,000 units per month.
Heber Smith, a college student in Utah, is investigating what he believes is a promising business opportunity. His idea is to manufacture and sell plastic jello molds in the form of the Salt Lake Temple. Heber has a tentative purchase commitment from a book and gift retail chain for 4,000 units over the first three months of initial operations. Based on his personal research and preliminary marketing efforts, he believes that the following is a reasonable estimate of total sales volume at a price of $ 2.50 per unit for the first quarter of operations beginning September 1, 20X1:
Business Feasibility Studyfor
HEAVENLY MOLDS, INC.
Sept. Oct. Nov.
Projected sales in # of units 2,000 3,000 4,000
Heber can lease a used injection molding machine for $2,000 per month plus $.08 per unit of production on a three year lease. Other manufacturing overhead costs expected on a monthly basis include the following:
Heber currently plans to manufacture the jello molds rather than contract out their production. The raw materials required for production of a single jello mold, regardless of design, is 1 lb. of polypropylene which can be purchased from a local supplier for $ .30 per lb.
Direct manufacturing labor costs are projected on a piece rate basis at $.20 per unit produced. Employer payroll taxes are estimated at 10% of the direct labor cost.
Indirect materials (equipment maintenance supplies and other)
$ 300 per month plus $.03 per unit
$ 250 per monthIndirect labor (equipment and mfg. building maintenance)
Direct Materials $.30Direct Labor .20Mfg. Overhead:
Employer Payroll Tax Machine Lease .08Indirect Materials .03Workman's Comp. .02Utilities .05Mold Depreciation .10
TOTAL $.80
.02
1A.1 Manufacturing (Product) Costs:
Variable Costs Per Unit:
More Practice with CVPProblem: Heavenly Molds Part 1 Problem: Heavenly Molds Part 1
Problem: Heavenly Molds Part 1Problem: Heavenly Molds Part 1
Problem: Heavenly Molds Part 1Problem: Heavenly Molds Part 1
Page 2 of 3
Determine the # of jello molds that would have to be sold in any month to simply breakeven.
2.
SR - VC - FC = NI2.50X - 0.90X - 5,400 = 0
1.60X1.60
5,4001.60=
X = 3,375 units
1.60X - 5,400 = 0
Determine the # of jello molds that would have to be sold in any month in order to provide Heber with a profit of $2,000 for the month.
3.
SR - VC - FC = NI2.50X - 0.90X - 5,400 = 2,000
1.60X1.60
7,4001.60=
X = 4,625 units
1.60X - 5,400 = 2,000
Calculate the sales price per unit that must be charged if Heber wishes to generate a monthly profit of at least $3,000 at a sales volume of 4,000 units per month.
4.
SR - VC - FC = NI4,000X - 3,600 - 5,400 = 3,000
4,000X4,000
12,0004,000=
X = $3.00 per unit
4,000X - 9,000 = 3,000
Mfg. Overhead:
TOTAL $3,830
1A.2 Manufacturing (Product) Costs:
Fixed Costs Per Unit:
1,120Building Rent (80% of fixed rent
costs of $1,400)
Utilities (80% of fixed utility costs of $200) 160
Indirect Labor 250Indirect Materials 300
$2,000Machine Lease
Utilities (20% of fixed utility costs of $200) 40
TOTAL $1,570
1B.1 Selling and Administrative Costs:Variable Costs Per Unit:
$280Building Rent (20% of fixed rent
costs of $1,400)
Copy Machine, Paper 250Telephones, Fax etc. 300
150Other Office Supplies
Sales Commissions $.10
1B.2 Selling and Administrative Costs:Fixed Costs Per Unit:
50General Liability Ins.500Accounting Service
More Practice with CVPSolution: Heavenly Molds Part 1 Solution: Heavenly Molds Part 1
Solution: Heavenly Molds Part 1
Solution: Heavenly Molds Part 1
Solution: Heavenly Molds Part 1
Page 3 of 3
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