ACCT2102 August 28, 2018 Chapter 3 August 28 Chapter 3 Cost-volume Profit Relationships (as part of your preparation for class, you need to work through the review problem on p. 95. Do not consult the solution until you have worked the problem) Contribution margin . . . Contribution margin ratio CVP graph Breakeven . Breakeven and target profit analysis . Margin of safety . Operating leverage . Sales mix and break-even analysis Problems that will be covered in class: Ex 3-2, 3-4, 3-5, 3-6, 3-7,3-8, 3-9,3-10 EXERCISE 3-2 Prepare a Cost-Volume-Profit (CVP) Graph [LO 3-2] Karlik Enterprises distributes a single product whose selling price is $24 and whose variable expense is $18 per unit. The company's monthly fixed expense is $24,000. Required: 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 point in unit sales using your cost-volume-profit graph. EXERCISE 3-4 Computing and Using the CM Ratio [LO 3-3] Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total variable expenses were $120,000, and fixed expenses were $65,000. Required: 1. What is the company's contribution margin (CM) ratio? 2. Estimate the change in the company's net operating income if t were to increase its total sales by $1,000