Asked by Deijah Drakeford on May 21, 2024
Verified
Melody Manufacturing produces a hip-hop CD that is sold for $20. The contribution margin ratio is 40%. Fixed expenses total $9200.
Instructions
(a) Compute the variable cost per unit.
(b) Compute how many CDs Melody Manufacturing will have to sell in order to break even.
(c) Compute how many CDs Melody Manufacturing will have to sell in order to make a target net income of $16200.
Contribution Margin Ratio
The percentage of sales revenue that exceeds variable costs, indicating how much earnings are available to cover fixed expenses and generate profit.
Fixed Expenses
Recurring costs that do not vary with the level of production or sales over a short period, such as rent or salaries.
Variable Cost
Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.
- Learn the elementary principles of conducting a Cost-Volume-Profit (CVP) analysis.
- Analyze the break-even levels in unit and dollar amounts by varying input variables.
- Pinpoint approaches to attain desired profitability by manipulating sales figures, operational costs, and pricing models.
Verified Answer
AT
Adrianna TurciosMay 23, 2024
Final Answer :
(a) Variable cost per unit: $20 × (1 - .40) = $12/unit
(b) $20X - $12X - $9200 = 0
= 1150 units ($9200 ÷ $8)
(c) $20X - $12X - $9200 = $16200
= 3175 units ($25400 ÷ $8)
(b) $20X - $12X - $9200 = 0
= 1150 units ($9200 ÷ $8)
(c) $20X - $12X - $9200 = $16200
= 3175 units ($25400 ÷ $8)
Learning Objectives
- Learn the elementary principles of conducting a Cost-Volume-Profit (CVP) analysis.
- Analyze the break-even levels in unit and dollar amounts by varying input variables.
- Pinpoint approaches to attain desired profitability by manipulating sales figures, operational costs, and pricing models.