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Financial Management
Assignments week 3
Raymond den Bakker
Liset van den Broek
Toby Fryars
Rozemarijn van Laar
Babette Vesters
3-21 CVP analysis, income taxes
1. How many cars must Brooke Motors sell each month to break even?
Q = Revenue/(Price-Variable costs)
Q = (85,000+129,200)/(27,000-23,600) = 63
63 cars must be sold each month to reach
the target monthly net income of $51,000
3-28 Sales mix, three products
Bobbies Bagel Shop sells only coffee and bagels. Bobbie estimates that every time she
sells one bagel, she sells four cups of coffee. The budgeted cost information for Bobbies
products for 2011 follows:
I. How many cups of coffee and how many bagels must Bobbie sell in order to break
even assuming the sales mix of four cups of coffee to one bagel, given previously?
Q = Fixed costs/Contribution Margin (= P-V)
F = 5,000+2,000 = $7,000
P = 4 cups of coffee+1 bagel = (4*2.50)+3.75 = $13.75
Vcoffee = 0.50+0.50+0.25 = $1.25
Vbagel = 0.50+1.00+0.25 = $1.75
V4 cups of coffee+1 bagel = (4*1.25)+1.75 = $6.75
Q = 7,000/(13.75-6.75) = 1.000 combinations of 4 cups of coffee and 1 bagel.
Meaning Bobbie has to sell 4.000 cups of coffee and 1.000 bagels to break even.
II. If the sales mix is four cups of coffee to one bagel, how many units of each
product does Bobbie need to sell to earn operating income before tax of
$28,000?