Exercise Chapter 6

EXERCISE CHAPTER 6
Total Per unit

Sales ( 9,900 units ) 346,500 $35.00
Variables expenses 198,000 20.00
Contribution margin 148,500
Fixed expense 135,000
Net opearting income 13,500
Total Per unit

Sales ( 10,100 units ) 353,500 $35.00
Total Per unit

Sales ( 9,000 units ) 315,000 $35.00
Net opearting income 0
Sales level Total revenue Total cost =
Variable + Fixed
2,000 48,000 60,000
4,000 96,000 96,000
6,000 144,000 132,000
8,000 192,000 168,000
Sales level Total revenue Total cost =

Variable + Fixed
1,200 19,200 29,200
2,400 38,400 42,400
3,600 57,600 55,600
4,800 76,800 68,800
1. CM = Sale – variable expense = 200,000 – 120,000 = 80,000

CM ratio = CM / Sale = 80,000 / 200,000 = 0,4
2. DT tăng thêm = LN tăng thêm / CM ratio
→ LN tăng thêm = 1,000 * 0,4 = 400
1.
Present Expected
Sales 90 x 2,000 = 180,000 180,000 + 9,000 =
189,000
Variable expense 63 x 2,000 = 126,000 189,000 x 70% + 5,000
= 132,300
CM 54,000 56,700
Fixed 30,000 35,000
Net 24,000 21,700
Net operating income decrease 2,300 → No

- Use CVP : (1) profit before increasing ads budget= quantity x CM per unit – total fixed
expenses
(2) Profit after before increasing ads budget= quantity x CM per unit – total
fixed expenses
(1) – (2) changes in profit after increasing ads budget = changes in quantity x CM per unit –
changes in fixed expense. This equation is right when CM per unit unchange
CM per unit before : 27$/unit
CM per unit after : 27$/unit
Beacause per unit unchanged, changes in profit = change in quantity sold x CM per unit - changes
in total fixed cost
Change in profit = changes in sales x CM ratio – changes in total fixed expenses
= 2,700 – 5,000 = -2,300
Changes in sales 9,000
CN ratio 30%
= change in total CM 2,700
Example 1
Type 1
changes in profit = quantity sold 2 x CM2 per unit - quantity sold 1 x CM1 per unit – ( total fixed
1 – total fixed 2 )
Type 2
Decision : reject. Profit impact is negative

Example 2
changes in profit = quantity sold 2 x CM2 per unit - quantity sold 1 x CM1 per unit – ( total fixed
1 – total fixed 2 )
Quantity sold before using 500 units
higher quanlity raw material
X CM per unit before using 200$/unit
higher quality raw materials
Total CM before using higher 100,000$
quality raw materials
Quantity sold after using 580 units

higher quanlity raw material
X CM per unit after using CM per unit = selling price –
higher quality raw materials variable = 500 – ( 300 + 10 )
= 190$/unit
Total CM after using higher 110,200
quality raw materials
Changes in CM 10,200
-changes in fix 0
Changes in profit 10,200
2.
Present Expected
Sales 90 x 2,000 = 180,000 180,000 x ( 1 + 10% ) =
198,000
Variable expense 63 x 2,000 = 126,000 198,000 x 70% + 2 x
2,000 = 142,600
CM 54,000 55,400
Yes because CM increase
CM = 120 – 80 = 40
1. Unit sales to attain the targer profit = ( 10,000 + 50,000 ) / 40 = 1,500 unit
2. 1,625 unit
1.
Break – even sale
CM ratio = 1/3
0 = CM ratio x Sales – Fixed expense
Sales = 22,500
Margin of safety = 1,000 x 30 – 22,500 = 7,500
2. 7,500 / 30,000 = 0,25
1.
DOL = CM / Net operating income = 48,000 / 10,000 = 4,8
2. 4,8 x 5% = 0,24
3.
Present Expected
Sales 80,000 80,000 x ( 1 +5% ) =
84,000
Variable expense 32,000 84,000 x 40% = 33,600
CM 48,000 50,400
Fixed expense 38,000 38,000
Net operating income 10,000 12,400
(12,400 – 10,000 ) / 10,000 = 0,24

1. CM ratio = 30,000/ 100,000 = 0,3
2. 0 = CM ratio x Sales – Fixed
0 = 0,3 x sales – 24,000
Sales = 80,000
3.
Claim Makeover Total
Sales 3/10 x 80,000 = 7/10 x 80,000 = 80,000
24,000 56,000
Variable expense 24,000 x 2/3= 16,000 5/7 x 56,000 = 40,000 56,000
CM 8,000 16,000 24,000
Net operating income 0
1. CM per unit = ( 180,000 – 120,000 ) / 15,000 = 4
Net operating income = 60,000 – 50,000 = 10,000
2. CM per unit x unit sold – fixed = 8,000
Unit sold = 4,000
CM per unit = ( sales – variable expense ) / unit sold
Variable expense = 60,000
3. CM per unit = ( sale – variable expense ) / unit sold
Sale = 200,000
CM per unit x unit sold – fixed = net opearating income
Fixed = 118,000
4. CM per unit x unitl sold – fixed = net operating income
CM per unit = 15
CM per unit = ( sales – variable expense ) / unit sold
Variable expense = 210,000
1. CM ratio = CM / sale
→CM = 100,000
CM – fixed = net operating income
→Fixed = 93,000
Sales – variable = CM
→Variable = 400,000
2. CM ratio = ( 400,000 – 260,000 ) / 400,000 = 0,35
Net operating income = ( 400,000 – 260,000 ) – 100,000 = 40,000
3. CM – 130,000 = 20,000
→CM = 150,000
CM ratio = CM / Sales
→Sales = 150,000 / 60% = 250,000
Sales – variable = CM
→Variable = 250,000 – 150,000 = 100,000
4. CM ratio = ( 600,000 – 420,000 ) / 600,000 = 0,3
CM = CM ratio x sales = 0,3 x 600,000 = 180,000
CM – fixed = Net operating income
Fixed = 180,000 – ( -5,000 ) = 185,000
1.
Present Expected
Sales 300,000 20,000 x ( 1+15%) x 15
= 345,000
Variable expense 180,000 345,000 x 60% =
207,000
CM 120,000 138,000
2.
Present Expected
Sales 300,000 300,000 – 1,5 x 20,000
= 270,000
Variable expense 180,000 30,000 x 60% = 18,000
CM 120,000 162,000
3.
Selling price = 15 + 1,500 = 1515
Unit sold = 20,000 x ( 1- 5% ) = 19,000
Present Expected
Sales 300,000 19,000 x 1515 =
28.785.000
Variable expense 180,000 28.785.000x 60% =
17.271.000
CM 120,000 11.514.000
Fixed expense 70,000 70,000 + 20,000 =
90,000
Net operating income 50,000 11.424.000
4.
Selling price = 15 x ( 1+12% ) = 16,8
Unit sold = 20,000 x ( 1 – 10% ) = 18,000
Variable expense unit present = 180,000 / 20,000 = 9
Present Expected
Sales 300,000 18,000 x 16,8 = 302,400
Variable expense 180,000 302,400 x 60% +
302,400 x 60% x 60% =
290,304
CM 120,000 12,096
Net operating income 50,000 (57,904)
1. CM ratio = ( sale – variable ) / sale

0,3 = ( 40 x 16,000 – variable ) / ( 40 x 16,000 )
Variable = 448,000
448,000/16,000 = 28
2.
a) 0 = CM ratio x sales – fixed
Sales = 600,000
Unit sales = 15,000
b) CM per unit = 40 – 448,000 /16,000 = 12
Unit sales to attain the target profit = (60,000 + 180,000 ) / 12 = 20,000
Dollar sales to attain targer profit = ( 60,000 + 180,000 ) / 0,3 = 800,000
c) Variable expense = ( 28 – 4 ) x 16,000 = 384,000
CM ratio = ( 40 – 24) / 40 = 0,4
CM per unit = 40 - 24 = 16
Unit sales = 11,250
Sales = 450,000
1.
Total Per unit
Sales ( 15,000 units ) 300,000 $20.00
DOL = CM / Net operating income = 210 / 28 = 7,5

2.
a) DT tăng thêm = LN tăng thêm / CM ratio
CM ratio = 210/300 = 0,7
Ln tăng thêm = 3,000 x 20 x 0,7 = 42,000
Percentage in net operating income = ( 28,000 + 42,000 – 28,000) / 28,000 = 150%
b) 28,000 + 42,000 = 70,000
1.
CM per unit = 35 – ( 18 + 2 ) = 15
Fixed expense = 2,800 + 900 + 1,000 + 1,300 = 60,000
Break even point = 60,000 / 15 = 400
2. 300 = 60000/(P – 20 )
P = 40
1. Unit sale = Fixed / CM per unit = 108,000 / ( 50 – 32 ) = 6,000
Dollar sales = Fixed / CM ratio = 108,000 / 0,36 = 300,000
2. If the variable expense increase, the CM decrease ưhich result in a lower break even point
3.
Selling price = 50 x ( 1 – 10% ) = 45
Unit sold = 8,000 x ( 1 + 25% ) = 10,000
Present Expected
Sales 50 x 8,000 = 400,000 10,000 x 45 = 450,000
Variable expense 32 x 8,000 = 256,000 320,000
CM 144,000 130,000
4.
( 108,000 + 35,000 ) / ( 45 – 32 ) = 11,000

Exercise Chapter 6

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EXERCISE CHAPTER 6

Total Per unit

Total Per unit

Total Per unit

Sales level Total revenue Total cost =

1. CM = Sale – variable expense = 200,000 – 120,000 = 80,000

Net operating income decrease 2,300 → No

Decision : reject. Profit impact is negative

Quantity sold after using 580 units

Yes because CM increase

(12,400 – 10,000 ) / 10,000 = 0,24

1. CM ratio = ( sale – variable ) / sale

DOL = CM / Net operating income = 210 / 28 = 7,5

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