Chapter $5-$ Cost$-$Volume$-$Profit $($CVP$)$ Relationships Part II

Module $4-$ Homework Assignment

$($SHOW ALL WORK FOR FULL POINTS!$)$

Problem $1(25$ points, each worth $5$ points$)$

Company Overview:

Product: Decorative lawn ornament

Selling Price per Unit: $$20$

Variable Expenses per Unit: $$12(60\%$ is direct labor$)$

Fixed Expenses: $$150,000$

Last Year$$s Sales Volume: $25,000$ units

Assignment Tasks

$1.$ Contribution Margin & Operating Leverage

$($a$)$ Compute last year$$s CM ratio and break$-$even point in ornaments.

$($b$)$ Compute the degree of operating leverage at last year$$s sales level.

$($Show all work, including formulas.$)$

$2.$ Impact of Increased Variable Expenses

Next year$$s variable expenses will increase by $$3$ per ornament, but the selling price remains at $$20.$

Compute:

Next year$$s CM ratio Break$-$even point in units and sales dollars

$($Show all work, including formulas.$)$

$3.$ Sales Volume Required for Target Income

Using the new variable expense data from $(2),$ determine how many ornaments must be sold next year to earn a net operating income of $$90,000.$

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$4.$ Adjusting Selling Price to Maintain CM Ratio

If Clifton Company wants to maintain last year$$s CM ratio, what selling price per unit must it charge next year to cover the increased labor costs?

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$5.$ Impact of Automation on Cost Structure

A new automated manufacturing plant is under consideration.

This would:

Reduce variable expenses per ornament by $40\%$ Double fixed expenses per year

Compute:

New CM ratio New break$-$even point in units

$($Show all work, including formulas.$)$

give me all the answers and steps for the answers. Its for my MBA Accounting class.