The president wanted to know the break-even point for each of the company's products

The president wanted to know the break-even point for each of the company's products. Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:

VELCRO METAL NYLON
Normal annual sales volume 100,000 200,000 400,000
Unit selling price 1.65 1.50 0.80
Variable cost per unit 1.25 0.70 0.25
*Total fixed expenses are $400,000 per year.

All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.

Required:
1. What is the company’s over-all break-even point in total sales dollars?
2. Of the total fixed costs of $400,000, $20,000 could be avoided if the Velcro product were dropped, $80,000 if the Metal product were dropped, and $60,000 if the Nylon product were dropped. The remaining fixed costs of $240,000 consist of common fixed costs such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.
a. What is the break-even point in units for each product?
b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? Explain this result.


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(Break-even and other CVP relationships) Cedars Hospital has average revenue of $180 per patient day

3. Break-even and other CVP relationships

Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.

a. How many patient days does the hospital need to break even?
b. What level of revenue is needed to earn a target income of $540,000?
c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?

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For Kozy Company, actual sales are $1,540,000 and break-even sales are $1,078,000

For Kozy Company, actual sales are $1,540,000 and break-even sales are $1,078,000.

Compute the margin of safety in dollars and the margin of safety ratio.

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(ACC 561 EXCEL Application Exercise 2-65 CVP and Break-Even) Phonetronix is a small manufacturer of telephone and communications devices

ACC 561

4. Individual Assignment: Practice Text Exercises

• Complete the following problem sets from the Introduction to Management Accounting text:

EXCEL Application Exercise, CVP and Break-Even, on p. 89
2-65 CVP and Break-Even
Goal: Create an Excel spreadsheet to perform CVP analysis and show the relationship between price, costs, and break-even points in terms of units and dollars. Use the results to answer questions about your findings.
Scenario: Phonetronix is a small manufacturer of telephone and communications devices. Recently, company management decided to investigate the profitability of cellular phone production. They have three different proposals to evaluate. Under all the proposals, the fixed costs for the new phone would be $110,000. Under proposal A, the selling price of the new phone would be $99 and the variable cost per unit would be $55. Under proposal B, the selling price of the phone would be $129 and the variable cost would remain the same.
Under proposal C, the selling price would be $99 and the variable cost would be $49.
When you have completed your spreadsheet, answer the following questions:
1. What are the break-even points in units and dollars under proposal A?
2. How did the increased selling price under proposal B impact the break-even points in
units and dollars compared to the break-even points calculated under proposal A?
3. Why did the change in variable cost under proposal C not impact the break-even points
in units and dollars as significantly as proposal B did?
Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 2 Decision Guideline
Row 2: Phonetronix
Row 3: Cost-Volume-Profit (CVP) Analysis
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through D.
4. In Row 7, create the following bold-faced, right-justified column headings:
Column B: Proposal A
Column C: Proposal B
Column D: Proposal C
Note: Adjust cell widths when necessary as you work.
5. In Column A, create the following row headings:
Row 8: Selling price
Row 9: Variable cost
Row 10: Contribution margin
Row 11: Contribution margin ratio
Skip a row
Row 13: Fixed cost
Skip a row
Row 15: Break-even in units
Skip a row
Row 17: Break-even in dollars
6. Use the scenario data to fill in the selling price, variable cost, and fixed cost amounts
for the three proposals.
7. Use the appropriate formulas from this chapter to calculate contribution margin,
contribution margin ratio, break-even in units, and break-even in dollars.
8. Format all amounts as:
Number tab: Category: Currency
Decimal places: 0
Symbol: None
Negative numbers: Red with parenthesis
9. Change the format of the selling price, contribution margin, fixed cost, and break-even
in dollars amounts to display a dollar symbol.
10. Change the format of both contribution margin headings to display as indented:
Alignment tab: Horizontal: Left (Indent)
Indent: 1
11. Change the format of the contribution margin amount cells to display a top border,
using the default line style.
Border tab: Icon: Top Border
12. Change the format of the contribution margin ratio amounts to display as a percentage
with two decimal places.
Number tab: Category: Percentage
Decimal places: 2
13. Change the format of all break-even headings and amounts to display as bold-faced.
14. Activate the ability to use heading names in formulas under Tools ? Options:
Calculation tab: Check the box: Accept labels in formulas
15. Replace the cell-based formulas with “word-based” equivalents for each formula used
in Proposal A.
Example: Contribution margin for proposal B would be:
= (‘Selling price’ ‘Proposal B’) - (‘Variable cost’ ‘Proposal B’)
Note: The tic marks used in the example help avoid naming errors caused by data having similar titles (i.e., “contribution
margin” and “contribution margin ratio”). The parentheses help clarify groupings.
Help: Ask the Answer Wizard about “Name cells in a workbook.”
Select “Learn about labels and names in formulas” from the right-hand panel.
16. Save your work to a disk, and print a copy for your files.

Click here for the solution: (ACC 561 EXCEL Application Exercise 2-65 CVP and Break-Even) Phonetronix