AF 210

Ex1-Raw

1	What would be the revised net operating income per month if the sales volume increases by 100 units?
2	What would be the revised net operating income per month if the sales volume decreases by 100 units?
3	What would be the revised net operating income per month if the sales volume is 9,000 units?
						1	2	3
		Given:	Volume:	10000
				Total	Per Unit	Total	Total	Total
	Sales			350000
	Variable Expenses			200000
	Contribution Margin
	Fixed Expenses			135000
	Net Operating Income
			Contribution Margin Approach:	0

EX2-Raw

	Karlik Enterprises Unit Revenue (UR) = 24; Unit Variable Cost (UVC) = 18; and Total Fixed Cost (TFC) = 24000
1	Prepare a cost-volume-profit graph for the company up to a sales level of 8,000 units
2	Estimate the company’s break-even (BE) point in unit sales using your cost-volume-profit graph.
Given:	UR:		(slope of the revenue line)
	UVC:		(slope of the total cost line)
(unit cont margin)	UCM:
	TFC:		('Y' intercept for the total cost line)
	BE Vol:			NOTE: the 'Y' intercept for the revenue line = zero
	BE Rev:				(there will never be revenue at zero sales!)
	…If Y = a + bX (where a = Y intercept and b = slope), then two lines may be plotted as follows:
	X Values	Y (rev) Values	Y (cost) Values
(start w/ Zero)

Y Axis (Dollars)

X Axis (Quantity)

Cost Y Intercept = Tot Fixed Cost

Rev Y Intercept = $0 (at 0 Volume of Sales)

ΔY = Rev Slope

1 unit ΔX

Break Even (where cost = rev)

ΔY = Cost Slope

1 unit ΔX

NOTE: for profit to be possible, the Rev Slope (UR) MUST be greater than the Cost Slope (UVC)

EX3-Raw

	Jaffre Enterprises Unit Revenue (UR) = 16; Unit Variable Cost (UVC) = 11; and Total Fixed Cost (TFC) = 16000
1	Prepare a cost-volume-profit graph for the company up to a sales level of 4,000 units
2	Estimate the company’s break-even (BE) point in unit sales using your cost-volume-profit graph.

EX4-Raw

Holiday Creations, Inc., sold 50,000 units, total sales (Tot Rev) = $200,000, total variable expenses (TVC) = $120,000, and fixed expenses (TFC) = $65,000
1. What is the company’s contribution margin (CM) ratio?
2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,000?
			1			2
	Given:	Vol:				Increases
	(total revenue)	TR:			TR:
		TVC:
		TFC:
	(total cont margin)	TCM:
	(cont margin ratio)	Cont %:		=CM/TR	Cont %:
		Net Op Income:			Net Op Income:

EX5-Raw

Fixed expenses (TFC) are $30,000 per month and the company is selling (Vol) 2,000 units per month
1 net operating income change if the monthly advertising budget (Fixed Cost) increases by $5,000 and monthly sales increase by $9,000?
2 net operating income change if the company increases the variable expense by $2 per unit and increase sales volume (not "unit sales!") by 10%.
					1	2
					Change	Change
	Given:	Vol:
		UR:	90
		UVC:	63
		TR:
		TVC:
		TCM:
		Cont %:
		TFC:
		Net Oper Income:

EX6-Raw

Mauro Products selling price (UR) is $15, variable expense per unit (UVC) is $12, and fixed expense (TFC) is $4,200.

1. Calculate the company’s break-even point in unit sales.

2. Calculate the company’s break-even point in dollar sales.

3. If the company’s fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?

EX7-Raw

Lin Corporation's selling price per unit (UR) is $120, variable expense per unit (UVC) is $80, and monthly fixed expense (TFC) is $50,000.
1. Calculate the unit sales needed to attain a target profit of $10,000.
2. Calculate the dollar sales needed to attain a target profit of $15,000.
Given:
	UR:					Profit = UCM * Vol - TFC			(formula given in Chapter)
	UVC:					…Isolate the Unknown (Vol)
	UCM:				(Step 1: add TFC to both sides)	Profit + TFC = UCM * Vol			(equation equity and opposite process rules)
	TFC:				(Step 2: divide both sides by CM)	(Profit + TFC)/UCM = Vol			(equation equity and opposite process rules)
	BE Vol:				(reverse for ease of understanding)	Vol = (Profit + TFC)/UCM
	BE Rev:					…Now Plug in the Values!
						1	2
				(desired/given)	Profit:
					TFC:
					UCM:
					Vol:
					TR:

EX8-Raw

Molander Corporation's selling price per unit (UR) = $30, variable expense per unit (UVC) = $20, fixed expense/mo (TFC) = $7,500, and volume/mo (Vol) =1,000
1. What is the company’s margin of safety?
2. What is the company’s margin of safety as a percentage of its sales?
	Given:				If Volume is 1000, then:
					Vol:	1,000
					UR:	30
					UVC:	20	BE Rev:		Margin of Safety
					TR:			1
					TVC:				Margin of Safety %
					TCM:			2
					TFC:	7,500
					Net Oper. Income: