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Management Accounting - Cost Analysis

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Nelson Company manufactures running shoes. The selling price per pair of shoes (one unit) averages $80 and variable costs per pair are $47.50. The sales volume of $776,000 produces $100,750 of net income before taxes.

Required:

a. Compute total variable costs.

b. Compute total fixed costs

c. Compute the break-even point in units.

d. Compute the quantity of units above breakeven to reach targeted
net income before taxes.

e. Compute the contribution margin and contribution percentage

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Total Sales = 776,000

Net Income = 100,750

SP = 80

VC = 47.5

a. Compute total variable costs.

Units Sold = total sales / SP = 776,000/80 = 9700

Variable cost (total) = VC/unit x # of units sold ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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