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    Cost Volume Profit

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    Grant company manufactured and sold 1,000 sabres during November. Selected data for this month is as follows:

    Sales $100,000
    Direct materials used 21,000
    Direct labor 15,000
    variable manufacturin overhead 13,000
    Fixed manufacturing overhead 14,000
    variable selling and administrative expenses ?
    Fixed selling and administrative expenses ?
    Contribution margin 40,000
    Operating income 22,000

    There were no beginning or ending inventories
    1. What were the variable selling and administrative expenses for November?

    2. What were the fixed selling and administrative expenses for november?

    3. What was the cost of goods sold during November?

    4. Without prejudice to your earlier answers, assume that the fixed selling and administrative expenses for November amounted to $4,000
    a. What was the break-even point in units for Novmber?
    b. How many units must be sold to earn a target operating income of $12,000?
    c. What would the selling price per unit have to be if the company wanted to earn an operating income of $18,000 on the sale of 900 units?

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    Solution Preview

    1. What were the variable selling and administrative expenses for November?

    The contribution margin is sales less all variable expenses. We are given that contribution margin is 40,000 and sales are 100,000. The total variable expenses ate 60,000. The total variable expenses comprice of Direct Material, direct labor, variable manufacturing overhead and variable selling and administrative expenses. We are given all except variable selling and administrative expenses. The other expenses total to - direct material - 21,000+direct labor 15,000+variable manufacturing overhead-13,000=49,000. The total variable expenses are 60,000. Variable selling and administrative expenses are 60,000-49,000=11,000.

    2. ...

    Solution Summary

    The solution explains the calculation of breakeven point and the units needed to be sold for a target operating income

    $2.19

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