Reference no: EM13986392

Cost-Volume-Profit Analysis

1. Kruez& Company produces valves for the widget industry.  Kruez's per unit sales price and variable costs are as shown.

Sales price	$12
Variable costs	8

Kruez's practical capacity is 40,000 units. Its total fixed costs aggregate $48,000 and it has a 40% effective tax rate.

The maximum net profit that Kruez can earn is:

a. $48,000.

b. $67,200.

c. $96,000.

d. $112,000.

2.  Bill Miller's Corporation makes two types of widgets for use in various products. Operating data and unit cost information for its products are presented next.

	Product A	Product B
Annual unit capacity	10,000	20,000
Annual unit demand	10,000	20,000
Selling price	$100	$80
Variable manufacturing cost	53	45
Fixed manufacturing cost	10	10
Variable selling and administrative	10	11
Fixed selling and administrative	5	4
Fixed other administrative	2	0
Unit operating profit	$20	$10
Machine hours per unit	2.0	1.5

Bill Miller's has 40,000 productive machine hours available. The relevant contribution margins, per machine hour for each product, to be utilized in making a decision on product priorities for the coming year, are

	Product A	Product B
a.	$17.00	$14.00
b.	$18.50	$16.00
c.	$20.00	$10.00
d.	$37.00	$24.00

3.  San Antonio Company produces accounting software. Its unit cost structure, based on an anticipated production volume of 150,000 units, is:

Sales price	$160
Variable costs	60
Fixed costs	55

The marketing department has estimated sales for the coming year at 175,000 units, which is within the relevant range of San Antonio's cost structure. San Antonio's breakeven volume (in units) and anticipated operating income for the coming year would amount to

a. 82,500 units and $7,875,000 of operating income.

b. 82,500 units and $9,250,000 of operating income.

c. 96,250 units and $3,543,750 of operating income.

d. 96,250 units and $7,875,000 of operating income.