Solutions for Problems in Chapter 3

Chapter 3 Cost-Volume-Profit Analysis

MULTIPLE CHOICE QUESTIONS

3.16. Ans: D 3.17. Ans: B 3.18. Ans: C 3.19. Ans: A 3.20. Ans: B

EXERCISES

3.21 A. Q = 1,200 gift baskets B. Q = 74,667 child visits

3.23 A. V = $31 B. F = $4,664 C. Q = 360 units

3.24 A. Profit (loss) before taxes is = $(100,000) B. S = $5.125

3.26 A. Contribution margin per unit = $80 B. Contribution margin ratio = 73% C. Breakeven point in units = 250 units D. S = $47,120

3.27 A. Contribution margin per unit = $36\ B. Contribution margin ratio = 30% C. Break-even = 2,384 units D. $336,000 sales E. increase by 1,575 units 3-2 Cost Management

3.28 A. TC = $38,363 + $0.825*appointments B. Q = 1,587 appointments

3.29 A. Q = 80,000 units B. TR = $10,000,000 C. TS = $12,000,000 D. Q = 240,000 units Dollar sales = $12,000,000

3.30 A. Q = 15,000 units B. Q = 29,000 units C. Q = 19,125 units D. Q = 31,625 units E. S = $28.33

3.31 A. TS = $1,208,333.33

3.32 A. Q = 275,000 boxes B. S = $4.50 C. Dollar sales = $1,920,000

3.33 A. Breakeven for option 1 = 400 sets Breakeven for option 2 = 317 sets Breakeven for option 3 = 0 sets B. option 1 C. option 3 D. TS = $18,000

3.34 A. ROI = 8.4% B. TS = 2,410,500€

3.35 A. Q = 136,667 units. B. 30,000 units, $300,000 C. 3.33 Chapter 3: Cost-Volume-Profit Analysis 3-3

3.36 A. 1,750 kgs., $8,400 B. 2,922 kgs., $14,026 C. $1,200, 12.5% D. 8.0

3.37 A. Contribution margin $18 per swimsuit Breakeven in units 42,500 swimsuits B. 7,500 swimsuits D. Contribution margin ratio = 0.45 Breakeven in revenues = $1,700,000 E. $300,000 F. $225,000 G. 56,786 swimsuits

3.38 A. $46,760 B. 1,274 dog-days C. 11,640 dog-days D. 38.6%

PROBLEMS

3.39 A. TC = $70,000 + $60*Q B. Q = 1,750 cases C. $40,000

3.40 B. 5.6 hours per day C. $53.67

3.41 A. two B. Regular: $9,804 Premium: $59,808 C. $20,232 D. Breakeven for Regular $ 21,032 Breakeven for Premium $ 86,027 Total corporate sales at breakeven $ 107,059 E. $12,173 3-4 Cost Management

3.43 A. Q = 932 units to break even C. $16,200 E. Q= 905 units F. Q = 1,100 units

3.44 A. $51,429 B. $791,215 C. 49,561 units sold

3.45 A. Sales = $750,000 Total VC - $525,000 VS&A = $65,000 COGS = $581,250 FMOH = $121,250 FC = $202,500 FS&A = $81,250 B. $835,000; 3,340 units

3.46 A Q = 62,500 kgs C. SP = $8.60

3.47 A. 2. Contribution margin = $188 per clock Contribution margin ratio = 0.8356 3. TC = $7,800 + $37*Q Breakeven in number of clocks = 42 clocks Breakeven in revenues = $9,335 4. 63 clocks

3.50 A. TC = €6,771 + 28% of total revenue. B. $ 23,293 C. 2.41

3.51 B. $383,750. C. $288,500. D. $375,000. E. 668,919 units, $1,705,135. F. $485,363. Chapter 3: Cost-Volume-Profit Analysis 3-5

G. Target Income Total Units $100,000 239,050 $150,000 275,827 $2,000,000 x 10% = $200,000 312,604

3.52 B. Breakeven point is revenue of $900,442. Revenue needed for an after-tax target income of $100,000 is $1,118,732. C. Product Emphasized After-Tax Profit Pets $ 4,875 Food 26,250 Toys 11,250 Other 15,000 MINI-CASES

3.53 A. Wildcat Lair’s breakeven point is $67,143 The university’s breakeven point is $78,333 B. 24.5

3.54 A. TC = $19,774 + $6.02*children attending. S = $27.07 per child

3.55 A. TR = 1,000*P – 2*P2 B. TC = $130,000-$200*P C. P1 = $458.12 (rounded up) P2 = $141.89 (rounded up) D. Break even occurs at the following two points: 83.76 units 716.22 units E. P = $300 per unit; 400 regulators