Assignment: COST BEHAVIOR AND COST-VOLUME-PROFIT ANALYSIS
This assignment consists of four independent scenarios for which computations should be shown.
Scenario A
Compute the break-even point in sales dollars if fixed costs are $200,000 and the total contribution margin is 20% of revenue.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario B
Danny Company makes and sells stuffed animals. One product, Panda Bear, sells for $28 per bear. Panda Bears incur fixed costs of $100,000 per month and a variable cost of $12 per bear. How many Panda Bears must be produced and sold each month to break even?
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario C
Jerry is considering buying a company if it will break even or earn net income on revenues of $80,000 per month. The company that Jerry is considering sells each unit it produces for $5. Use the following cost data to compute the variable cost per unit and the fixed cost for the period. Calculate the break-even point in sales dollars. Should Jerry purchase this company?
|
Volume (units)
|
Total Cost
|
|
8,000
|
$70,000
|
|
68,000
|
$190,000
|
HINT: Total costs include both variable and fixed portion, so it is necessary to break down total costs into variable and fixed before computing break-even.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario D
Reliable Delivery currently delivers packages for $9 each. The variable cost is $3 per package, and fixed costs are $60,000 per month. Compute the break-even point in both sales dollars and units under each of the following independent assumptions. Comment on why the break-even points are different.
1. The costs and selling price are as just given.
2. Fixed costs are increased to $75,000.
3. Selling price is increased by 10%. (Fixed costs are $60,000.)
4. Variable cost is increased to $4.50 per unit. (Fixed costs are $60,000 and selling price is $9.)
5. Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Expectations:
Show computations in good format and explain answers as required. Excel is a great tool to make computations and present financial information in an easy to understand format. Write comments below the computations in Excel. Submit only the Excel file.