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CVP Analysis

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1. C-V-P Analysis
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the
shop, sells hand-woven blankets for an average price of $30 per blanket. Kerry buys the blankets
from weavers at an average cost of $21. In addition, he has selling expenses of $3 per blanket.
Kerry rents the building for $300 per month and pays one employee a fixed salary of $500
per month.
1. Determine the number of blankets Kerry must sell to break even.
2. Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
3. Assume that Kerry can produce and sell his own blankets at a total variable cost of $16 per
blanket, but that he would need to hire one additional employee at a monthly salary of $600.
a. Determine the number of blankets Kerry must sell to break even.
b. Determine the number of blankets Kerry must sell to generate a profit of $1,000 per
month.

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Solution Summary

This shows how to determine how much must be sold to break even and make a profit in given situations.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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