COST VOLUME PROFIT ANALYSIS

1. A. Old: 3 | New: 7
CM/NI
Old 600k/200k = 3
New 1.4k/200k = 7

B. 1st: 1,333,333 | 2nd: 1,714,286

Old 400k/.3 1,333,333

New 1.2M/.7 1,714,286

C. Old New

Sales 3,000,000 3,000,000

VC 1,400,000 600,000

CM 1,600,000 2,400,000

NI 400,000 1,200,000

1,200,000 1,200,000

2. A. Break-even point in Units: 20

CMu=20-9=11

BEu = 220k/11 = 20

B. Break-even point in Peso: 400,000

BEp =20*20=400,000

C. Margin of safety Percentage:100,000

MOS = 500k-400k =100,000

D. Sales in peso to earn NI of 165,000

X-.55X-220,000=165,000
.45X=385,000
X=855,555 – Sales
PROBLEMS

1. Break-even point in units: 12,000

CM = 2-.8 =.2
BEu =60,000/.2 =12,000

Break-even point in peso

12,000*.8=9,600+60,000=69,600

2. A. X-.6X – 1375,000 = 102,000

X=3,692,500

B. X-.6X-1375,000-150,000=102,000
X=3,317,500

C. X-.6X-1,375,000=.15X
X=5,500,000

3. X-.6X-600,000=120,000
X=1,800,000 sales/300,000 = 6pesos per unit

4. FIXED COST: 211,200

528,000-316,800-X=0
X=211,200

ACTUAL SALES: 660,000

X-.6X-211,200=.08X
X=660,000

MARGIN OF SAFETY
X=660,000-528,000
X=132,000

NET INCOME: 52,800

660,000*.08=52,800

MARGIN OF SAFETY RATIO

(660,000-528,000)/660,000 = .2
 5. A. Breakeven Point units: 55
Breakeven Point peso: 1,320,000

CM=24-13.2 =10.8

BEPu=594k/10.8 =55,000

BEPp=55k*13.2=726,000+594,000 =1,320,000

B. X-.55X-594,000=75,060
X=1,486,800/24=61,950

C. X-.55X-594,000-106,000=172,080
X=1,466,544

D. FC = 594,000+(594K*.2*.1)=605,880
VC=13.2+(13.2*.5*.1)=13.86

CM=24-13.86=-10.14
BEPu=605,880/13.86=60k
BEPp=60k*13.86=831,600+605,880=1,437,480

E. (50,000*24) – (50,000*13.2) – 594,000 = (54,000)

6. CMU = 2(4)+3(2)=14
18-14=4 VC
BEPU = 420,000/14 =30,000
BEPP = 30,000*4=120,000+420,000=540,000

VARIABLE & ABSORPTION COSTING

VCR COMPANY

Variable costing
DM 30,000
DL 24,000
VMO 12,000
Total 66,000/2,200 = 30 per unit

100+2200-2000=300*30=9,000
 Absorption costing
DM 30,000
DL 24,000
VMO 12,000
FMO 44,000
Total 110,000/2,200 = 50 per unit

100+2200-2000=300*50=15,000

ABC COMPANY

G, Beg 0

FG, Produced 10,000

FG, End (2,000)

COS(units) 8,000

DIRECT COSTING
Sales 256,000
Less: VMC (96,000)
EI 19,200
Manufacturing Margin 179,200
Less: FMC (64,000)
FSAE (80,000)
NI 35,200

ABSORPTION COSTING
Sales 256,000
Less: COS(16*8,000) 128,000
GP 128,000
Less: FSAE 80,000
NI 48,000

ABSORPTION COSTING

Sales 240,000
Cost of Sales *Variable (72,000)
*Fixed (56,000)
GP 112,000
VSAE (32,000)
 FSAE (20,000)
NI 60,000

VARIABLE COSTING
Sales 240,000
VMC (72,000)
Manufacturing Margin 168,000
Less: Variable SAE (32,000)
CM-Final 136,000
Less: Fixed MC 70,000
Fixed SAE 20,000
NI 46,000

There is a 14,000 difference between Absorption and Variable Costing

JOSH AND BIMBY DOLL COMPANY

a) Cost of unit of product under VC:

DM .1
DL .05
VMO .08
Cost .023
b) Income Statement
Variable Costing

Sales(7.5M*.5) 3,750,000
VCOGS(7.5M*.23) 1,725,000
VSAE(7.5M*.02) 150,000 (1,875,000)
CM 1,875,000
FMOH 500,000
FSAE 100,000 600,000
NI 1,275,000

BUDGETING

Scarborough Corporation

1. Sales Budget

Units Price Total

Thing one 60,000 70 4,200,000

Thing two 40,000 100 4,000,000

2. Production Budget
Thing one Thing two

Budgeted sales in units 60,000 40,000

Target finished goods inv 25,000 9,000

Total Requirement 85,000 49,000

Less: FG, beg 20,000 8,000

Units to be produced 65,000 41,000

3. Materials Purchases Budget in units

A B C

Materials (in production)

*Thing one( 4kg and 2kg) 260,000 130,000 -

*Thing two(5kg,3kg,1kg) 205,000 123,000 41,000

Target End Inv 36,000 32,000 7,000

Total rqrmnts in units 501,000 285,000 48,000

Inv, beg (32,000) (29,000) (6,000)

Materials to be purchased 469,000 256,000 42,000

4. Materials Purchases Budget in peso

Budgeted Purchases Expected Purchase
Units Price per unit Total

A 469,000 8 3,752,000

B 256,000 5 1,280,000

C 42,000 3 126,000

Budgeted Purchases 5,158,000

5. Labor Budget in peso

Budgeted Direct Total Rate Total
Production Manufacturing Hours Per
(units) Labor Hours Hour
Per unit

Thing one 65,000 2 130,000 3 390,000

 Thing two 41,000 3 123,000 4 492,000

Total 882,000

6. Budgeted FG Inventory

THING ONE
DM costs
A(4*8) 32
B(2*5) 10 42

DL 2*3 6

MOC@2/DL(2*2) 4

Budgeted MC per unit 52

FG Inventory of Thing one (52*25,000) 1,300,000

THING TWO

DM Cost

A(5*8) 40

B(3*5) 15

C(1*3) 3 58

DL(3*4) 12

MOC(3*2) 6

Budgeted MC per unit 66

FG Inventory of Thing two (66*9,000) 594,000

SOROCO COMPANY

SALES BUDGET

1 2 3 4 YEAR

Expected unit sales 240,000 300,000 360,000 300,000 1,200,000

Unit Selling Price 50 50 50 55

Total Sales 12,000,000 15,000,000 18,000,000 16,500,000 61,500,000

PRODUCTION BUDGET

1 2 3 4 YEAR

Expected unit Sales 240,000 300,000 360,000 300,000

Desired FG ending 75,000 90,000 75,000 66,000

Total Rqd units 315,000 390,000 435,000 366,000

FG, beginning 60,000 75,000 90,000 75,000

Rqd Production units 255,000 315,000 345,000 291,000 1,206,000