Cost Profit Analysis
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1. Exercise in Cost-Volume-Profit Relationships
Barkins Moving Company specializes in hauling heavy goods over long distances. The company's revenues and expenses depend on revenue miles, a measure that combines both weights and mileage. Summarized budget data for next year are based on predicted total revenue miles of 800,000. At that level of volume, and at any level of volume between 700,000 and 900,000 revenue miles, the company's fixed costs are $120,000. The selling price and variable costs are:
Per Revenue Mile
Average selling price (revenue) $1.50
Average variable expenses $1.30
1. Compute the budgeted net income. Ignore income taxes.
2. Management is trying to decide how various possible conditions or decisions might affect net income. Compute the new net income for each of the following changes. Consider each case independently.
a. A 10% increase in sale price
b. A 10% increase in revenue miles
c. A 10% increase in variable expense
d. A 10% increase in fixed expenses
e. An average decrease in selling price of 3¢ per revenue mile and a 5% increase in revenue miles. Refer to the original data.
f. An average increase in selling price of 5¢ and a 10% decrease in revenue miles
g. A 10% increase in fixed expenses in the form of more advertising and a 5% increase in revenue miles
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Solution Summary
This solution explains how to do an in-depth cost-profit analysis and considers seven different independent cases.
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l1. Exercise in Cost-Volume-Profit Relationships
Barkins Moving Company specializes in hauling heavy goods over long distances. The company's revenues and expenses depend on revenue miles, a measure that combines both weights and mileage. Summarized budget data for next year are based on predicted total revenue miles of 800,000. At that level of volume, and at any level of volume between 700,000 and 900,000 revenue miles, the company's fixed costs are $120,000. The selling price and variable costs are
Per Revenue Mile
Average selling price (revenue) $1.50
Average variable expenses ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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