Question

on the following question please show the formula for the steps and from were you get the numbers)

Cost-volume-profit analysis
Di & Co. has the following budgeted information for a contract: -
Fixed costs $ 270,000
Variable cost per unit $         20
Selling price per unit   $         40

Budgeted output / sales units          15,000
Required:
(a) Compute the number of units that must be sold to breakeven.                             

(b) How many units must be sold to earn $80,000 target profit?                                    

(c) What selling price would have to be charged to give a profit of $80,000?
                                                                                                                           

(d) How many additional units must be sold to cover an extra fixed cost of $12,000? (assuming selling price and variable cost per unit are constant)
                                                                               
(e) What is the profit-volume ratio?                                                                          
(f) Referring to part (e) above, if total sales revenue is $550,000, what is the total contribution and hence what is the net profit?                                                      

(g) Referring to part (a), what is the margin of safety?                                             
(h) What does the term relevant range mean?      

Answer 1

a)Number of units to be sold to achieve breakeven

= Fixed cost/Contribution Margin Per unit

=270000/20= 13500 Unit

* Contribution Margin per Unit= Sales - Variable cost

b)Computation of Units to sell to attain target profit of $80000

= (Fixed cost+ Target Profit)/Contribution Margin Per unit

=(270000+80000)/20= 17500 Unit

C)computation of Selling Price to attain target profit $80000

( SP- Variable cost ) X Qty Sold = Fixed Cost + Target Profit

= (SP-20)X 15000 = (270,000+80,000)

Selling Price ( SP)= $ 43.33

d)Computation of Additional units must be sold to cover an extra fixed cost of $12,000

= Additional Fixed Cost /Contribution Margin Per unit

=12,000/20= 600 Unit

e) Computation of PV Ratio

PV Ratio= Contribution/Sales *100

=$20/$40X 100=50%

f) Computation of Total Contribution and Net Profit , if total sales revenue is $550,000

Total Contribution = Sales Revenue X PV Ratio

=$550000X 50%=$2,75,000

Net Profit= Contribution - Fixed Cost

Net Profit = 275,000 - 270,000 = 5,000

g) Computation of Margin of Safety

Margin of safety =Sales - BEP Sales

15000- 13,500 = 1,500 units

h) The term Relevant range means the specific activity level that is bounded by a minimum and maximum amount

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