Question

Exercise 5-13 (Video)

Billings Company has the following information available for September 2020.

Unit selling price of video game consoles$400

Unit variable costs$280

Total fixed costs$54,000

Units sold600

Compute the unit contribution margin.

Unit contribution margin

Prepare a CVP income statement that shows both total and per unit amounts.

BILLINGS COMPANY
CVP Income Statement
For the Month Ended September 30, 2020

Total

Per Unit

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

$

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

Compute Billings’ break-even point in units.

Break-even point in units units

Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.

BILLINGS COMPANY
CVP Income Statement
For the Month Ended September 30, 2020

Total

Per Unit

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

$

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs

$

Answer 1

Ans. 1	Unit contribution margin = Selling price per unit - Variable cost per unit
		$400 - $280
		$120 per unit
Ans. 2	BILLINGS   COMPANY
	C V P Income Statement
	For the Month ended September 30, 2020
		Total	Per unit
	Sales (600 *p)	$240,000	$400
	Variable expenses (600 * v)	-$168,000	-$280
	Contribution margin	$72,000	$120
	Fixed expenses	-$54,000
	Net operating income	$18,000
	P   =   selling price per unit
	V = variable cost per unit
Ans. 3	Break even point (in units)   =   Fixed cost / Unit contribution margin
		$54000 / $120
		450	units
Ans. 4	BILLINGS   COMPANY
	C V P Income Statement
	For the Month ended September 30, 2020
		Total	Per unit
	Sales (450 *p)	$180,000	$400
	Variable expenses (450 * v)	-$126,000	-$280
	Contribution margin	$54,000	$120
	Fixed expenses	-$54,000
	Net operating income	$0