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CVP Analysis

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Brownstone Company began operations on January 1 to produce a single product. It used a standard absorption costing system with a planned production volume of 100,000 units. During its first year of operations, no variances were incurred and there were no fixed selling or administrative expenses. Inventory on December 31 was 20,000 units, and net income for the year was \$240,000.

1. If Brownstone had used variable costing, its net income would have been \$220,000. Compute the break even point in units under variable costing.
2. Draw a profit-volume graph for Brownston Company (using variable costing).

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1. If Brownstone had used variable costing, its net income would have been \$220,000. Compute the break even point in units under variable costing.

The difference between the absorption costing net income and variable costing net income is due to the fixed manufacturing costs. ...

Solution Summary

The solution explains the determination of the breakeven level and how prepare a profit volume graph

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