Question

EXERCISE 5-11 Missing Data; Basic CVP Concepts L05-10.LO5-9 Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format income statement for cach case, enter the known data, and then compute the missing items.) a. Assume that only one product is being sold in each of the four following case situations: Contribution Margin per Unit Net Operating Income (Loss) Case 1 2 3 4 Units Variable Sold Sales Expenses 15,000 $180,000 $120,000 ? $100,000 ? 10,000 $70,000 6,000 $300,000 ? Fixed Expenses $50,000 $32,000 $10 $13 $8,000 $12,000 $(10,000) $100,000 b. Assume that more than one product is being sold in each of the four following case situations: Average Contribution Margin Ratio 20% Fixed Expenses Case Variable Expenses ? $260,000 Sales $500,000 $400,000 Net Operating Income (Loss) $7,000 2 $100,000 $130,000 60% $20,000 $(5,000) $600,000 $420,000 ?

Answer 1

Part A

Case 1

Contribution margin per unit = (sales – variable expenses)/units sold = (180000-120000)/15000 = $4

Net operating income (loss) = sales – variable expenses – fixed expenses = 180000-120000-50000 = $10000

Case 2

Total contribution margin = net operating income + fixed expenses = 8000+32000 = $40000

Variable expenses = sales – contribution margin = 100000-40000 = $60000

Units sold = total contribution margin / contribution margin per unit = 40000/10 = 4000

Case 3

Sales = variable expense + total contribution margin = 70000+(13*10000) = $200000

Fixed expenses = total contribution margin – net operating income = (13*10000)-12000 = $118000

Case 4

Contribution margin per unit = (fixed expenses - net operating loss)/units sold = (100000-10000)/6000 = $15

Variable expenses = sales – total contribution margin = 300000-90000 = $210000

Part B

Case 1

Variable expenses = sales * (1-average contribution margin ratio) = 500000*(1-20%) = $400000

Fixed expenses = sales – variable expenses – net operating income = 50000-40000-7000 = $93000

Case 2

Average contribution margin ratio = (sales-variable expense)/sales = (400000-260000)/400000 = 35%

Net operating income = sales – variable expense – fixed expenses = 400000-260000-100000 = $40000

Case 3

Total contribution margin = net operating income + fixed expenses = 20000+130000 = $150000

Sales = total contribution margin / average contribution margin ratio = 150000/60% = $250000

Variable expenses = sales * (1-average contribution margin ratio) = 250000*(1-60%) = $100000

Case 4

Average contribution margin ratio = (sales-variable expense)/sales =(600000-420000)/600000 = 30%

Fixed expenses = sales – variable expense + net operating loss = 600000-420000+5000 = $185000