Accounting Business Reporting for Decision Making

CHAPTER 10 Cost–volume–profit analysis 449

10.21  LO2

Find the missing figure for each of the following independent cases.

(Hint: Reconstruct the statement of profit or loss for each scenario.)

Selling

price/unit

Variable

costs/unit Units sold

Contribution

margin (total) Fixed costs Profit (loss)

$ 40

18

e.

8

5

$ 20

c.

20

6

i.

60 000

10 000

50 000

100 000

500 000

$

a.

60 000

250 000

g.

j.

$

b.

48 000

f.

50 000

460 000

$ 300 000

d.

0

h.

40 000

10.22  LO2

For each of the following independent situations, calculate the break-even point in units.

a. Variable cost per unit of $3, annual fixed costs of $85 500 and selling price per unit of $9.

b. Variable costs per unit of $10, annual fixed costs of $126 400 and selling price per unit

of $20.

c. Variable costs per unit of $20, annual fixed costs of $81 300 and selling price of $23.

10.23  LO1, 5

Yen Rippon is about to commence operations as a beauty technician. She believes her costs can

be classified as fixed or variable.

a. Distinguish between fixed and variable costs.

b. Outline how Yen could make use of CVP analysis to help guide her business operations.

10.24  LO5

Discuss some possible options when the break-even unit target appears too difficult to achieve.

10.25  LO2

Emy Fong has been operating a single-product firm for three years. As this product is now well

established in the market, Fong is thinking about adding two new products to her range. Outline

the impact of her decision on the calculation of her new break-even point.

10.26  LO10

In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product that

normally sells for $55. A foreign wholesaler offers to buy 3000 units at $35 each. The Whine

Company will incur special shipping costs of $2 per unit.

Required

Assuming that the Whine Company has excess operating capacity, indicate the profit (or loss) it

would realise by accepting the special order.

10.27  LO7

Coconut Plantations Pty Ltd advertises weekly specials and makes sure that the shelf space

(9  metres) at the entrance to the store showcases the specials. For the current week, their

three products are being advertised at special prices. Each product must be allocated shelf space.

Candles Soaps Detergent

Contribution margin per product (at special price) $8 $16 $3.50

Minimum shelf space required per product 2 metres 4 metres 2 metres

Required

How should the shelf space be allocated to the three products to maximise the profits from the

weekly specials?

10.28   LO10

Ontrack Company produces compasses for cross-country skiing. The production capacity is

45 000 compasses, and the company is currently operating at 85 per cent capacity. Variable

manufacturing costs are $10 per unit. Fixed manufacturing costs are $425 000. The compasses

are normally sold directly to Outdoor Tent City at $25 each. Ontrack has an offer from Neverlost

Company (a foreign wholesaler) to purchase an additional 5000 compasses at $13 per unit.