CVP Analysis Cost and Management Accounting

QUESTION 1: M/s. ABC sells wedding dresses. The cost of each dress is comprised of the following:
Selling price of $1,000 and variable costs of $400. Total fixed costs for M/s. ABC are $90,000.
Required:
A. What is the contribution margin per dress?
B. What is the ABC’s total profit when 200 dresses are sold?
C. How many dresses must Bridal Shoppe sell to reach the breakeven point?
D. How many dresses must Bridal Shoppe sell to yield a profit of $60,000?

QUESTION 2: Northenscold Company sells several products. Information of average revenue and costs
are as follows:

Selling price per unit $20.00

Variable costs per unit:
Direct materials $4.00
Direct manufacturing labor $1.60
Manufacturing overhead $0.40
Selling costs $2.00
Annual fixed costs $96,000
Required:
1. Calculate the contribution margin per unit.
2. Calculate the number of units Northenscold’s must sell each year to break even.
3. Calculate the number of units Northenscold’s must sell to yield a profit of $144,000.

QUESTION 3: Berhannan’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a
selling Commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and
administrative costs total $2,500.
Required:
A. What is the contribution margin per phone?
B. What is the breakeven point in phones?
c. How many phones must be sold to earn a targeted profit of $7,500?

Q.4) Following information has been gathered while analyzing the past and future costs of Star
Manufacturing Concern.

Variable Costs % of Sales in Fixed Costs in PKR

PKR
Direct Material 36.0 -
Direct Labor 31.2 -
Factory Overhead 13.8 313,400
Marketing Expenses 4.5 75,200
Administration Expenses 1.2 73,400
Total Fixed Costs 462,000

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CVP Analysis Cost and Management Accounting

Budgeted sales for the next year is PKR 3,135,000

Required:
A) Breakeven sales in PKR
B) Profit at budgeted sales volume
C) Profit if the actual sales;
I. Drop 13% from Budgeted Sales
II. Increase 20% from Budgeted Sales

Q.5) ABC Company which is located in Karachi manufacture the component used in the farm machinery.
The firms fixed cost are PKR 4,000,000 per year, the variable cost of each component PKR 2000 and the
components are sold for PKR 3000 each. The company sold 5000 components during the year.

Required:
1. Compute the break even points in units.
2. What will be the new breakeven point if Fixed cost increases by 10%.
3. What is the company’s net income for the year?
4. The sales manager believes the reduction in the sales price to PKR 2500 will result in orders for
1200 components each year. What will be the new B.E point if point is changed?

Q.6) XYZ is a small breakfast restaurant. The charge is PKR 50 for a full breakfast per person. The
manager told that the variable expenses are PKR 20 per person and fixed cost is PKR 42000 per month.
Compute the following:

1. Contribution Margin per unit

2. Contribution Margin Ratio
3. Breakeven point in unit
4. Breakeven point in PKR

Q.7) IU Limited produced and sold 60,000 caps during the year at a price of PKR 20/unit. Variable
manufacturing costs were PKR 8/unit and variable marketing costs were PKR 4/unit sold. Fixed costs
amounted to PKR 180,000 for manufacturing and PKR 72,000 for marketing. You are required to
compute the following;

1. IU Limited’s breakeven point in sales PKR

2. Number of sales unit required to earn a net income of PKR 180,000.
3. Variable manufacturing costs are expected to increase by 10 percent in the coming year,
compute the breakeven point of the coming year.
4. If the manufacturing costs increases by 10 percent, compute the selling price that would yield
the same contribution margin ratio in the coming year