How much is the breakeven volume

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Reference no: EM131967309

Problem 1. (CVP relation - main version)

Use the following contribution margin statement for 2009:

                                       2009
Sales volume (#units)        100
Revenue                           $7,500
Variable costs                   $5,500
Contribution margin          $2,000
Fixed costs                      $1,200
Profit                               $800

Required:

a) How much is the price per unit, unit variable cost and unit contribution margin?

b) Write down the CVP relation: profit as a function of sales volume in units (fill in the missing numbers in an equation like: Profit = 2 *Volume - 50).

c) If sales volume increases by 20% (from 100 to 120), how much is the $ change in profits?

d) What is the sales volume required to achieve target profit of $1,400?

e) How much is the breakeven volume?

Breakeven revenue?

f) How much is the margin of safety (at current sales volume of 100 units)? (enter percentages as a fraction of 1, i.e., enter 23.47% as 0.2347)

g) Based on the margin of safety computed in (f), will you start making a loss if sales drop by 30%?

h) How much is the operating leverage (at current sales volume of 100 units)? (enter percentages as a fraction of 1, i.e., enter 23.47% as 0.2347)

If fixed costs increase, will it increase or decrease the operating risk? (enter 1=increase, 2=decrease) 2.-/5 points

Question 2.

Suppose that the price is $35, unit variable cost is $28/unit, and total fixed costs are $1,100.

Required:

a) Compute the unit contribution margin and contribution margin ratio:

unit CM=
CM ratio= (enter CMR as a fraction of 1, not as %)

b) Write down the CVP relation (version 2): profit as a function of sales revenue.

(fill in the missing numbers in an equation like Profit = 0.35 * Revenue - 50).
Profit = * Revenue -

c) Based on the CVP relation in (b), what is the breakeven revenue?

d) Based on the CVP relation in (b), what is the sales revenue required to achieve target profit of $5,000?

Reference no: EM131967309

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