CVP Analysis and Marginal Analysis Paper 4

1

Oradell Company sells its single product at a price of $60 per unit and incurs the following variable costs per unit of product:
Direct material 16
Direct labor 12
Manufacturing overhead 7
Variable manufacturing costs 35
Selling expenses 5
Total variable costs 40
Oradell’s annual fixed costs are $880,000, and Oradell is subject to a 30% income tax rate. The number of units of product that Oradell Company must sell annually to break even is






2

Oradell Company sells its single product at a price of $60 per unit and incurs the following variable costs per unit of product:
Direct material 16
Direct labor 12
Manufacturing overhead 7
Variable manufacturing costs 35
Selling expenses 5
Total variable costs 40
Oradell’s annual fixed costs are $880,000, and Oradell is subject to a 30% income tax rate. If prime costs increased by 20% and all other values remained the same, Oradell Company’s contribution margin (to the nearest whole percent) is






3

Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was $5040. Donnelly’s expectations for the coming year include the following:
? The sales price of the T-shirts will be $9
? Variable cost to manufacture will increase by one-third
? Fixed costs will increase by 10%
? The income tax rate of 40% will be unchanged
The selling price that would maintain the same contribution margin rate as last year is






4

Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break even. The net income last year was $5040. Donnelly’s expectations for the coming year include the following:
? The sales price of the T-shirts will be $9
? Variable cost to manufacture will increase by one-third
? Fixed costs will increase by 10%
? The income tax rate of 40% will be unchanged
The number of T-shirts Donnelly Corporation must sell to break even in the coming year is






5

Harper and her band want to put on a concert. They have looked at two venues, a small one and a large one, and have compiled the following information:
Small Large
Capacity of venue 400 1200
Fixed costs $2000 $5000
The variable cost per customer for both venues is $2. The band will charge $10 per customer for the small venue or $14 for the large venue. What is the breakeven point of the small venue?






6

Harper and her band want to put on a concert. They have looked at two venues, a small one and a large one, and have compiled the following information:
Small Large
Capacity of venue 400 1200
Fixed costs $2000 $5000
The variable cost per customer for both venues is $2. The band will charge $10 per customer for the small venue or $14 for the large venue. What is the breakeven point of the large venue?






7

Tonykinn Company is contemplating marketing a new product. Fixed costs will be $800,000 for production of 75,000 units or less and $1,200,000 if production exceeds 75,000 units. The variable cost ratio is 60% for the first 75,000 units. Variable costs will decrease to 50% of sales for units in excess of 75,000. If the product is expected to sell for $25 per unit, how many units must Tonykinn sell to break even?






8

A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. Its margin of safety is $40,000. What is the company’s breakeven point?






9

The Childers Company breaks even at an annual sales volume of 75,000 units. Actual annual sales volume was 100,000 units, and the company reported operating income of $200,000. The annual fixed costs for the Childers Company are






10

A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. Its margin of safety is $40,000. What are the company’s fixed costs?






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