Question

Exercise 5-11 Missing Data; Basic CVP Concepts [LO5-1, LO5-9]

Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format income statement for each case, enter the known data, and then compute the missing items.)

Required:

a. Assume that only one product is being sold in each of the four following case situations:

b. Assume that more than one product is being sold in each of the four following case situations:

(For all requirements, Loss amounts should be indicated by a minus sign.)

• Required A

Assume that only one product is being sold in each of the four following case situations:

	Case #1 Case #2 Case #3 Case #4 Unit sold 8,500 20,500 6,000 Sales $272,000 $370,000 $198,000 Variable expenses 161,500 184,500 Fixed expenses 89,000 173,000 74,000 Net operating income (loss) $(25,000) $215,500 $22,000 Contribution margin per unit $10 $15

• Required B

Assume that more than one product is being sold in each of the four following case situations:

	Case #1 Case #2 Case #3 Case #4 Sales $457,000 $198,000 $297,000 Variable expenses 134,640 86,130 Fixed expenses 70,000 466,000 Net operating income (loss) $52,520 $56,000 $(6,130) Contribution margin ratio (percent) 36 % % 75 % %

Answer 1

Answer to Requirement A:

Case #1:

Contribution Margin = Sales - Variable Expenses
Contribution Margin = $272,000 - $161,500
Contribution Margin = $110,500

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
Net Operating Income (Loss) = $110,500 - $89,000
Net Operating Income (Loss) = $21,500

Contribution Margin per unit = Contribution Margin / Units Sold
Contribution Margin per unit = $110,500 / 8,500
Contribution Margin per unit = $13

Case #2:

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
-$25,000 = Contribution Margin - $173,000
Contribution Margin = $148,000

Contribution Margin = Sales - Variable Expenses
$148,000 = $370,000 - Variable Expenses
Variable Expenses = $222,000

Contribution Margin per unit = Contribution Margin / Units Sold
$10 = $148,000 / Units Sold
Units Sold = 14,800

Case #3:

Contribution Margin per unit = Contribution Margin / Units Sold
$15 = Contribution Margin / 20,500
Contribution Margin = $307,500

Contribution Margin = Sales - Variable Expenses
$307,500 = Sales - $184,500
Sales = $123,000

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
$215,500 = $307,500 - Fixed Expenses
Fixed Expenses = $92,000

Case #4:

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
$22,000 = Contribution Margin - $74,000
Contribution Margin = $96,000

Contribution Margin = Sales - Variable Expenses
$96,000 = $198,000 - Variable Expenses
Variable Expenses = $102,000

Contribution Margin per unit = Contribution Margin / Units Sold
Contribution Margin per unit = $96,000 / 6,000
Contribution Margin per unit = $16

Answer to Requirement B:

Case #1:

Contribution Margin Ratio = (Sales - Variable Expenses) / Sales
0.36 = ($457,000 - Variable Expenses) / $457,000
Variable Expenses = $292,480

Contribution Margin = Sales - Variable Expenses
Contribution Margin = $457,000 - $292,480
Contribution Margin = $164,520

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
$52,520 = $164,520 - Fixed Expenses
Fixed Expenses = $112,000

Case #2:

Contribution Margin = Sales - Variable Expenses
Contribution Margin = $198,000 - $134,640
Contribution Margin = $63,360

Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $63,360 / $198,000
Contribution Margin Ratio = 32%

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
Net Operating Income (Loss) = $63,360 - $70,000
Net Operating Income (Loss) = -$6,640

Case #3:

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
$56,000 = Contribution Margin - $466,000
Contribution Margin = $522,000

Contribution Margin Ratio = Contribution Margin / Sales
0.75 = $522,000 / Sales
Sales = $696,000

Contribution Margin = Sales - Variable Expenses
$522,000 = $696,000 - Variable Expenses
Variable Expenses = $174,000

Case #4:

Contribution Margin = Sales - Variable Expenses
Contribution Margin = $297,000 - $86,130
Contribution Margin = $210,870

Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $210,870 / $297,000
Contribution Margin Ratio = 71%

Net Operating Income (Loss) = Contribution Margin - Fixed Expenses
-$6,130 = $210,870 - Fixed Expenses
Fixed Expenses = $217,000