# Practice Test Exercises Q 2-48

Practice Test Exercises | | | |
June 28, 2010 | | | |
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* Question 2-48, CVP and Financial Statements for a Mega-Brand Company, on p. 82 | | | |
Net sales |   \$     75,044.20 | | |
Cost of products sold |   \$     33,125.00 | | |
Selling, general, & administrative expense |   \$     21,848.00 | | |
Operating Income |   \$     20,071.20 | | 33% INCREASE |
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The percentage increase for operating income is different than the percentage difference than sales because |
the costs of products sold and selling expense is a percentage of net sales. | |
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Question 2-61, CVP in a Modern Manufacturing Company, on p. 87 | |
1. Budgeted Profit Old | | Budgeted Profit New | |
600,000 * 3.10= 1,860,000 | | 1,860,000 - 1,140,000 | |
1,860,000 - 580,000 = | | | |
1,280,000   | |   \$                                 720,000.00 | |
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2. Old   BE Point | | New BE Point | |
Sales- Var Exp- Fixed Exp = Net Income | | | |
1,860,000 - 732,000- 528,000 | | 1,860,000 - 132,000- 528,000 | |
\$600,000 | | 1,200,000 | |
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3. If the volume decrease to 500000, the profit and BE point decreases by the 100,000 which is the qty decrease amount. |
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4. If the   volume increased to 700,000 so the profit and BE point increase by 100,000 | |
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5. The new operation doubles in profit of the old operations which makes it more profitable than the old. |
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Chapter 2 Decision Guideline |
Phonetronix |
Cost-Volume-Profit (CVP) Analysis |
June 28, 2010 |
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| Proposal A | Proposal B | Proposal C |
Selling Price | \$99 | \$129 | \$99 |
Variable Cost | 55 | 55 | 49 |
Contribution Margin | \$44 | \$74 | \$50 |
Contribution Margin Ratio | 44.44% | 57.36% | 50.51% |
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Fixed Costs | \$110,000 | \$110,000 | \$110,000 |
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Breakeven...