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Unit 3 Assignment: Chapter 3 Connect Homework

LO 3-1) 3-29. Basic Decision Analysis Using CVP

Derby Phones is considering the introduction of a new model of headphones with the following price and cost characteristics.

Sales price $ 270 per unit

Variable costs 120 per unit

Fixed costs 300,000 per month

Required

a. What number must Derby sell per month to break even?

b. What number must Derby sell to make an operating profit of $180,000 for the month?

(LO 3-1) 3-30. Basic Decision Analysis Using CVP

Refer to the data for Derby Phones in Exercise 3-29. Assume that the projected number of units sold for the month is 5,000. Consider requirements (b), (c), and (d) independently of each other.

Required

a. What will the operating profit be?

b. What is the impact on operating profit if the sales price decreases by 10 percent? Increases by 20 percent?

c. What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent?

d. Suppose that fixed costs for the year are 20 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?

(LO 3-4) 3-63. Extensions of the CVP Model—Multiple Products

On-the-Go, Inc., produces two models of traveling cases for laptop computers—the Programmer and the Executive. The bags have the following characteristics.

Programmer Executive

Selling price per bag $70 $100

Variable cost per bag $30 $40

Expected sales (bags) per year 8,000 12,000

The total fixed costs per year for the company are $819,000.

Required

a. What is the anticipated level of profits for the expected sales volumes?

b. Assuming that the product mix is the same at the break-even point, compute the break-even point.

c. If the product sales mix were to change to nine Programmer-style bags for each Executive-style bag, what would be the new break-even volume for On-the-Go?

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