Accounting-Cost behavior text book exercises

1

Name

Unit name

Unit code

Date

2-48 CVP and Financial Statements for a Mega-Brand Company

Procter Gamble Company

Predicted operating income for 2007

Net sales (68 ,222 110 75044

Costs of products sold (33 ,125 110 36438

Contribution 38606

Selling , general , and administrative expense 21 ,848

Operating income 16 , 758

Percentage increase in income

16 , 758 - 13 ,249 100

13 ,249 26 .5

Percentage increase in income differs from the percentage increase in sales since some of the cost are fixed hence

an increase in revenue is not accompanied by a proportionate increase in expenses

2-61 CVP in a Modern Manufacturing Environment

Hewlett-Packard Company

1 . Budgeted profit

Old operation new operation

Sales (600 ,000 3 .1 ) 1 ,860 ,000 1 ,860 ,000

Variable cost (600 ,000 V .C per unit ) 1 ,260 ,000 660 ,000

Contribution 600 ,000 1 ,200 ,000

Fixed cost 580 ,000 1 ,140 ,000

Profit 20 ,000 60 ,000

2 . Break-even point

Break-even point fixed cost

Contribution per unit

Contribution per unit Number of unit

Contribution per unit (old operation 1

Contribution per unit (new operation 2

Old operation 580 ,000

1

B .E .P 580 ,000 units

New operation 1 ,140 ,000

2

B .E .P 570 ,000 units

3 . Effect on profit if production fall to 500 ,000

Since production of 500 ,000 units is below the break-even point under old and new production method the company will experience a loss

Old operation new operation

Contribution 500 ,000 1 ,000 ,000...