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    CVP Analysis

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    During its 3rd year of business, Pete's Pasta estimates that 415,000 pastas (385,000 meaty pastas and 30,000 veggie) will be made. Direct material costs per unit are $.74 per meaty pasta and $.62 per veggie pasta. Direct labor costs are $2.51 per meaty pasta and $2.78 per veggie pasta. Monthly fixed selling and administrative costs are $15,300 while monthly fixed manufacturing overhead is $2,851. The variable overhead cost is $.55 per pasta. The sales price for veggie pastas is $5.25 per pasta and the sales price for meaty pastas is $5.00.

    A) How will the break even point change if the sales mix changes to 80% meaty pastas and 20% veggie pastas?

    B) What would happen to the break even point if the labor costs increased by 10%?

    C) What would happen to the break even point if Pete's Pasta increased the sales price of meaty pastas to $5.25 and veggie pastas to $5.50?

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    https://brainmass.com/business/cost-volume-profit-analysis/cvp-analysis-bep-328657

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    A) How will the break even point change if the sales mix changes to 80% meaty pastas and 20% veggie pastas?

    Material Costs for meaty pasta= $0.74
    Direct labor cost for meaty pasta=$2.51
    Variable overheads=$0.55
    Total Variable cost=(0.74+2.51+0.55) =$3.8 per meaty pasta
    Price of meaty pasta=$5.00
    Contribution margin for meaty pasta=Price-Variable Cost=5-3.8=$1.2

    Material Costs for veggie pasta= $0.62
    Direct labor cost for veggie pasta=$2.78
    Variable overheads=$0.55
    Total Variable cost=(0.62+2.78+0.55) =$3.95 per veggie pasta
    Price of veggie pasta=$5.25
    Contribution margin for veggie pasta=Price-Variable ...

    Solution Summary

    The solution describes the methodology to find break even point in response to changes in sales mix, increase in labor cost and changes in prices.

    $2.19