Question

CVP Analysis Van Otis Chocolates sells boxes of designer chocolates. They had the following information for...

CVP Analysis

Van Otis Chocolates sells boxes of designer chocolates. They had the following information for the year:

         Sales (6500 units)……………………$81,250

         Variable Expenses …………………..$52,000

         Fixed Expenses………………….……$49,500

Calculate the following (all count as 1 point each):

1. Calculate the UCM (unit contribution margin):

2. Calculate the CMR (contribution margin ratio):

3. Calculate the breakeven point in units:

4. Calculate the breakeven point in sales dollars:

5. Assume they want to earn a profit of $36,000. How many units do they have to sell?

6. What is the margin of safety in units?

Homework Answers

Answer #1

1. The unit contribution margin = (Sales - Variable Cost) / Total Units

= ( $ 81,250 - $ 52,000) / 6,500 Units

= $ 4.50 per unit

2. contribution margin ratio = unit contribution margin / Selling Price Per Unit

= $ 4.50 /( $ 81,250 / 6,500)

= 4.50/ 12.50

= 36.00%

3.The break even point in units = Fixed cost /unit contribution margin

= $ 49,500 / $ 4.50 per unit

= 11,000 units

4. The break even point in sales dollars = break even point in units * selling price per unit

= 11,000 units * $ ( 81250 / 6500)

= $ 137,500

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