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How did cvp develop the fixed and variable cost

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Question - Chris, Victor, and Pete, known to their customers as CVP, make and sell a single product nationwide. Information about the product follows:

Unit Price $120.00

Unit Variable Cost 85.00

Total Fixed Cost $6,400,000

Expected sales 400,000 units

Required -

(a) Show calculations for CVP's break-even point in both units and sales dollars.

(b) Show calculations for CVP's expected income for next year at their planned sales volume. Ignore income taxes for this calculation.

(c) If CVP's variable cost of manufacturing decreases by 5% next year and they reduce their selling price by 5%, will their break-even point and expected income increase or decrease? Show calculations.

(d) How did CVP develop the fixed and variable cost information used in this analysis? Explain briefly in your own words.

(e) What limitations, if any, would you express to CVP as they prepare to use this information to plan their next year's operations?

Reference no: EM133088318

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