Question

Exercise 7-23 Fill in Blanks; Basic CVP Relationships (LO 7-1, 7-2)

Fill in the missing data for each of the following independent cases. (Ignore income taxes.) (Do not round intermediate calculations.)

	Sales Revenue	Variable Expenses	Total Contribution Margin	Fixed Expenses	Net Income	Break-Even Sales Revenue
1.		$96,000		76,800		$96,000
2.	215,000	169,000	46,000			215,000
3.	450,000	180,000	270,000	60,000	210,000
4.	50,000	10,000	40,000	19,400	20,600

Answer 1

Solution:

	Sales revenue	Variable cost	Total contribution margin	Fixed costs	Net Income	Break even sales revenue
1.	480,000	$96,000	384,000	76,800	307,200	$96,000
2.	215,000	169,000	46,000	46,000	0	215,000
3.	450,000	180,000	270,000	60,000	210,000	91,667
4.	50,000	10,000	40,000	19,400	20,600	15,520

Working Notes:

1. Break even sales revenue = Total Fixed expenses/Contribution Margin Ratio
$96,000=$76,800/contribution margin ratio
contribution margin ratio =0.80 or 80%
contribution margin ratio = (contribution margin / sales)*100
contribution margin = sales-variable expenses
let sales value be X
0.80 = (X-$96,000)/X
0.80X=X-$96,000
$96,000 = 0.20X
X=$480,000
Therefore sales revenue of $480,000
Contribution Margin =sales - variable expenses
contribution margin =$480,000 - $96,000
Total contribution margin = $384,000
Net Income = Total contribution margin - Fixed expenses
Net Income = $384,000 - $76,800
Net Income = $307,200

2.)
= Break even sales - contribution margin
= 215,000 - 46,000
=169,000
Fixed cost = contribution margin
Fixed cost = 46,000

3.)
Sales revenue = Variable cost+Contribution margin
=169,000+270,000
=439,000
Fixed cost = net income - contribution margin
=270,000-215,000
=55,000
Contribution margin ratio = 270,000/450,000
=60%
Break-even point = fixed cost / (unit contribution margin / unit sales price)
=55,000*60%
=91,667

4.)
Contribution margin = 50,000 - 10,000 =40,000
Contribution margin ratio = 40,000/50,000 = 80%
Break even point = fixed cost / (unit contribution margin/unit sales price)
=19400/80%
=15,520