CVP calculations
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Anthony Industries
Income Statement
for year ending December 31, 2009
revenues $750,000
variable costs:
Variable manufacturing costs $280,000
variable selling costs 120,000
Total variable costs 400,000
Contribution margin $350,000
Fixed costs:
Fixed manufacturing costs $130,000
Fixed selling & other costs 80,000
Total fixed costs 210,000
Net Income $140,000
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Required:
1)determine the break even point in units. The company has a capacity of 150,000 units and is currently at two thirds of its capacity.
2) the sales manager believes the company could increase sales by 8,000 units if advertising expenditures are increased by $22,000. Determine the effect on income if the company increases advertising expenses as suggested by the sales manager.
3) what is the maximum amount the company could pay for advertising if the advertising would increase sales by 8,000 units?
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Solution Summary
The solution explains some calculations using CVP concepts
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1. Breakeven units = Fixed cost/unit contribution margin
Total units = 150,000 X 2/3 = 100,000
Total contribution margin = 350,000
Unit ...
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