Ch.09 Kinney 9e SM Final.doc-CHAPTER 9 B...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
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Ch.09 Kinney 9e SM Final.doc-CHAPTE...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
##### Page 21
Chapter 9
281
42.
Ducks
Ducklings
Sales
\$ 24.00
\$12.00
Variable costs
(12.00
)
(8.00
)
Contribution margin
\$ 12.00
\$
4.00
Mix
× 1
× 5
Total contribution margin
\$ 12.00
\$20.00
The average contribution margin ratio is \$32 ÷ \$84 = 38.1% (rounded)
b.
Break-even point = \$288,000 ÷ \$32 = 9,000 bags per year or 750 bags a month
Ducks: 750 × 1 = 750 per month
Ducklings: 750 × 5 = 3,750 per month
c.
Target profit is \$96,000 × 12 = \$1,152,000
(\$288,000 + \$1,152,000) ÷ \$32 = 45,000 bags per year or 3,750 bags a month.
Ducks: 3,750 × 1 = 3,750 per month
Ducklings: 3,750 × 5 = 18,750 per month
d.
Ducks
Ducklings
Sales
\$ 24.00
\$12.00
Variable costs
(12.00
)
(8.00
)
Contribution margin
\$ 12.00
\$
4.00
Mix
× 1
× 9
Total contribution margin
\$ 12.00
\$36.00
Target profit after tax is \$31,680.
Pre-tax profit is \$31,680 ÷ (1
0.40) = \$52,800 monthly or \$633,600 per year.
Break-even = (\$633,600 + \$288,000) ÷ \$48 = 19,200 bags per year, or 1,600
per month
Units
Revenue
Ducks (19,200 × \$24)
19,200
\$
460,800
Ducklings (19,200 × 9 × \$12)
172,800
2,073,600
Total
\$2,534,400
e.
[\$288,000 + (\$8,500 × 12)] ÷ [\$12 + (\$8 × 5)]
(\$288,000 + \$102,000) ÷ \$52 = 7,500
Yes, the company would want to make the change because the break-even
point is reduced from 9,000 mix units to 7,500 mix units.
43.
a. and b.
Total variable costs:
Reindeer
Snowmen
Flamingos
Variable product cost
\$12.00
\$15.00
\$25.00
Variable selling expenses
6.00
4.50
8.00
3.00
5.50
6.00
Total
\$21.00
\$25.00
\$39.00
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##### Page 22
282
Chapter 9
Reindeer
Snowmen
Flamingos
Sales
\$ 40.00
\$ 35.00
\$ 60.00
Variable costs
(21.00
)
(25.00
)
(39.00
)
Contribution margin
\$ 19.00
\$ 10.00
\$ 21.00
Mix
× 1
× 2
× 4
Total contribution margin
\$ 19.00
\$ 20.00
\$ 84.00
Contribution margin per “bag” = \$19 + 20 + \$84 = \$123
Break-even point in units = (\$420,000 + \$150,000 + \$80,178) ÷ \$123
= 5,286 “bags”
Units Sold
Revenues
Reindeer (5,286 × \$40.00)
5,286
\$
211,440
Snowmen (5,286 × 2 × \$35.00)
10,572
370,020
Flamingos (5,286 × 4 × \$60.00)
21,144
1,268,640
Total
\$1,850,100
c.
Units = (\$650,178 + \$250,428) ÷ \$123 = 7,322 bags
Units Sold
Revenues
Reindeer (7,322 × \$40.00)
7,322
\$
292,880
Snowmen (7,322 × 2 × \$35.00)
14,644
512,540
Flamingos (7,322 × 4 × \$60.00)
29,288
1,757,280
Total
\$2,562,700
d.
Pre-tax profit = \$155,718 ÷ (1
0.40) = \$259,530
Break-even in units = (\$650,178 + \$259,530) ÷ \$123 = 7,396 bags
Units Sold
Revenues
Reindeer (7,396 × \$40.00)
7,396
\$
295,840
Snowmen (7,396 × 2 × \$35.00)
14,792
517,720
Flamingos (7,396 × 4 × \$60.00)
29,584
1,775,040
Total
\$2,588,600
e.
MS bags = 7,396 bags
5,286 bags = 2,110 bags
MS \$ = 2,110 × [\$40 + (\$35 × 2) + (\$60 × 4)] = \$738,500
MS % = 2,110 ÷ 7,396 = 28.5%
44.
a. and b.
Total variable costs:
Oak
Hickory
Cherry
Direct material
\$10.40
\$6.50
\$17.60
Direct labor
3.60
0.80
12.80
2.00
0.30
3.50
Variable selling
1.00
0.50
4.00
0.40
0.20
0.60
Total
\$17.40
\$8.30
\$38.50
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