In: Accounting
CVP Analysis (9pts): The Ood Sphere, Ltd.
produces and sells a single product, gaming headsets, with...
CVP Analysis (9pts): The Ood Sphere, Ltd.
produces and sells a single product, gaming headsets, with the
following information:
|
Per unit:
|
Per month:
|
Selling price
|
$79.00
|
|
Variable manufacturing costs:
|
|
|
Direct Materials
|
$18.00
|
|
Direct Labor
|
$7.75
|
|
Variable Factory OH
|
$6.00
|
|
Fixed manufacturing costs (Fixed OH)
|
|
$28,350
|
Variable selling and administrative costs
|
$10.50
|
|
Fixed selling and administrative costs
|
|
$17,180
|
The company sells 1,500 units during the month ended February
28th.
- (3pts) Prepare a contribution margin income
statement for February at the current sales volume of 1,500
units.
- (1pt) How many headsets need to be sold per month in
order to break even (round your answer up to the nearest whole
unit).
- (1pt). How many headsets need to be sold per month in order to
earn a target profit of $20,000 (round your answer up to the
nearest whole unit).
- (4pts total) The production manager at The Ood Sphere is
considering purchasing a new machine to use at its main factory
where production occurs. As a result, the manager
predicts the following impact on production, price, and costs if
they purchase this machine for the upcoming month ended March
31st:
- Fixed Factory OH costs will increase by $4,000 per
month.
- Direct labor costs will decrease by $1.50 per
unit.
- The selling price will be decreased by $0.25 per unit.
- Sales volume will increase from its current level of 1,500
units to 1,650 units.
- (3pts) Prepare a contribution margin income
statement for March assuming all of these changes are
implemented.
- (1pt) How many headsets need to be sold in March in
order to break even assuming all of these changes are
implemented (round your answer up to the nearest whole
unit)?