Cvp Exercises

Topics: Variable cost, Contribution margin, Costs Pages: 2 (587 words) Published: June 24, 2013
BA 117 Problem Set #1 - CVP
Deadline: November 26, 2011

A.The break-even point in units can be computed as Fixed Costs divided by the contribution margin per unit. On the other hand, the break-even point in pesos can be computed as Fixed Costs divided by the contribution margin ratio. Using the profit equation π = TR – TC; where π = operating profit, TR = Total Revenue and TC = Total Cost, derive the break-even formulas.

B.From the profit equation π = TR – TC, derive the formula for the following: 1.Amount of sales needed to achieve a specified target profit 2.Number of units that needs to be sold to achieve a specified target profit 3.Margin of Safety in Pesos

4.Margin of Safety in Units

C.Assume Unit Selling Price of Php 300, Unit Variable Cost of Php 120, Total Fixed Costs of Php 1.08 million and sales volume of 10,000 widgets. Solve the following: 1.Unit contribution margin
2.Contribution Margin Ratio
3.Breakeven point in units
4.Breakeven point in Pesos
5.Margin of Safety in Units
6.Margin of Safety in Pesos
7.Degree of Operating Leverage

D.Assume Unit Selling Price of Php 200, Unit Variable Cost of Php 120, Total Fixed Costs of Php 4 million, sales volume of 8,000 widgets and Tax Rate of 40%. Compute for the needed sales in units and in pesos under the following independent profit targets: 1.Profit before tax is Php 2 million

2.Profit after tax is Php 3 million
3.Profit rate is 15% of Sales
4.Profit rate is Php 20 per unit
5.Profit rate is 12% after tax
6.Profit rate is Php 9 after tax

E.Assume Unit Selling Price of Php 5,000, Unit Variable Cost of Php 4,200, Total Fixed Costs of Php 12.8 million, sales volume of 25,000 widgets and tax rate of 40%. Assuming that a 10% increase in unit sales price will decrease quantity sold by 20%, what would be the change in profit? Percentage change in breakeven units?

F.Assume Unit Selling Price of Php 5,000, Unit Variable Cost of Php 4,200, Total Fixed Costs...
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