EXERCISE 20.7: Using Cost-Volume-Profit Formulas.

| October 3, 2018

EXERCISE 20.7: Using Cost-Volume-Profit
Formulas.
MURDER TO GO! Writes and manufactures
murder mystery parlor games that it sells to retail
Using Cost-Volume-Profit Formulas. The
following is per-unit information relating to the manufacture and sale of this
product:
Unit sales price . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30
Variable cost per unit . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fixed costs per year . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
360,000
Determine the following, showing as part of
your answer the formula that you used in your computation.
For example, the formula used to determine
the contribution margin ratio (part a ) is:
Contribution Margin Ratio = Unit Sales
Price – Variable Costs per Unit

Unit Sales Price

a. Contribution margin ratio.

b. Sales volume (in dollars) required to
break even.

c. Sales volume (in dollars) required to
earn an annual operating income of $440,000.

d. The margin of safety (in dollars) if
annual sales total 60,000 units.

e. Operating income if annual sales total
60,000 units.

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