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CVP Charting

Franscioso Company sells several products. Information of revenue and cost per unit when 11,000 units are sold is as follows:

Selling price per unit $28.50
Direct material $5.25
Direct manufacturing labor $1.15
Manufacturing overhead $0.25
Variable selling costs $1.85
Annual fixed costs per unit $10.00

Required:
1. What is the Contribution Margin if 11,000 units are sold?
2. What is operating income if 15,000 units are sold?
3. What is the breakeven point in units?
4. What is the margin of safety if 12,000 units are sold?
5. Graph the following assuming 0 to 15,000 units are sold and find the following:
a. Total Revenue
b. Total Variable Costs
c. Total Fixed Costs
d. Total Costs
e. Breakeven point on the graph

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Solution Preview

Please refer attached file for better formatting and graph.

1. What is the Contribution Margin if 11,000 units are sold?
Total Variable Cost per unit=V=5.25+1.15+0.25+1.85= $8.50
Fixed Cost=F=10*11000=$110,000.00
Selling Price per unit=P=$28.50
Contribution margin per unit=CM=P-V=28.50-8.50=$20.00
Total Contribution Margin if 11000 units are sold=CM*11000=$220,000.00

2. What is operating income if 15,000 units are sold?
Total Variable Cost=TVC=V*Q=8.50*15000=127,500.00
Total Fixed ...

Solution Summary

CVP analysis is an important tool in financial decision making. Solution to given problem depicts the steps to calculate the contribution margin, operating income, breakeven point and margin of safety. CVP graph is also created in MS Excel format.

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