COST BEHAVIOR AND COST-VOLUME-PROFIT ANALYSIS
This assignment consists of three independent scenarios for which computations should be shown.
Scenario A
Compute the break-even point in sales dollars if fixed costs are $200,000 and the total contribution margin is 10% of revenue.
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario B
Danny Company makes and sells stuffed animals. One product, Panda Bear, sells for $28 per bear. Panda Bears incur fixed costs of $120,000 per month and a variable cost of $12 per bear. How many Panda Bears must be produced and sold each month to break even?
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
Scenario C
Jerry is considering buying a company if it will break even or earn net income on revenues of $100,000 per month. The company that Jerry is considering sells each unit it produces for $5. Use the following cost data to compute the variable cost per unit and the fixed cost for the period. Calculate the break-even point in sales dollars. Should Jerry purchase this company?
Volume (units)
Total Cost
8,000
$70,000
68,000
$190,000
Scenario C is more involved than the other three. HINT: You can use the high-low method to determine the fixed and variable portions of the total costs. See for example http://www.principlesofaccounting.com/chapter-18/behavior-analysis/ (from the optional resource in the background material).
Show the analysis in a table format. Write a one-paragraph interpretation of the information presented in the table.
SLP Assignment Expectations
Show computations in good format and explain answers as required. Excel is a great tool to make computations and present financial information in an easy-to-understand format. Write comments below the computations in Excel. Submit only the Excel file. Both content and the clarity of the presentation will be evaluated for grading purposes.
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