CVP analysis
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The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs. Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.
Required:
(A) Calculate the break-even point in units and sales dollars.
(B) Calculate the safety margin.
(C) Bruggs & Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order.
Jacobs manufactures two products: A and B. The firm predicts a sales volume of 10,000 units for product A and ending finished-goods inventory of 2,000 units. These numbers for product B are 12,000 and 3,000, respectively. Jacobs currently has 7,000 units of A in inventory and 9,000 units of B.
The following raw materials are required to manufacture these products:
Product A requires three hours of cutting time and two hours of finishing time; B requires one hour and three hours, respectively. The direct labor rate for cutting is $10 per hour and $18 per hour for finishing.
Required:
(A) Prepare a production budget in units.
(B) Prepare a materials usage budget in pounds and dollars.
(C) Prepare a direct labor budget in hours and dollars for product A.
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Solution Summary
The solution explains various calculations relating to cost, volume and profit analysis
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The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs. Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.
Required:
(A) Calculate the break-even point in units and sales dollars.
In order to calculate the breakeven point, we need to convert the income statement into contribution margin format.
Sales 1,600,000
Variable Costs
Cost of Goods Sold 800,000
Operating ...
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