# CVP calculations

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 Preview

1. Breakeven units = Fixed cost/unit contribution margin

Total units = 150,000 X 2/3 = 100,000

Total contribution margin = 350,000

Unit ...

#### Solution Summary

The solution explains some calculations using CVP concepts