TASK: Cost-Volume Profit Analysis
Objectives
To be able to identify the relevant and irrelevant costs and benefits associated with each feasible alternative with the greatest overall net benefit to aid decision making.
Golden Sdn. Bhd.'s projected profit for the coming year is as follows:
|
|
Total $
|
Per Unit $
|
|
Sales
|
200,000
|
20
|
|
Total variable cost
|
120,000
|
12
|
|
Contribution margin
|
80,000
|
8
|
|
Total fixed cost
|
64,000
|
|
|
Operating income
|
16,000
|
|
a) Compute the variable cost ratio and the contribution margin ratio.
b) Compute the break-even point in units and sales ringgit.
c) How many units must be sold to earn a profit of $30,000?
d) Using the contribution margin ratio computed in step (a), compute the additional profit that
Golden would earn if sales were $25,000 more than expected.
e) For the projected level of sales, compute the margin of safety in units and in sales ringgit.
f) Suppose that Golden revised the forecast to show a 30 percent increase in sales over the
original forecast.
i.
What is the percent change in operating income expected from the revised forecast?
ii.
What is the total operating income expected by Golden after revising the sales forecast?