- CVP Analysis
Tanner Company's most recent contribution format income statement is presented below:
The company sells its only product for $15 per unit. There were no beginning or ending inventories.
Required:
a. Compute the company's break-even point in units sold.
b. Compute the total variable expenses at the break-even point.
c. How many units would have to be sold to earn a target profit of $9,000?
d. The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?
e. Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $2. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 1,000 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work.