20% CM increase: $40,000 * 1.20 = $48,000 Net profit: $(48,000 - 30,000) = $18,000 Increase in profit $8,000 $8,000/$10,000 = 80% Eclectic Corporation Eclectic Corporation manufactures and sells two products: A and B. The operating results of the company are as follows: Product A Product B Sales in units 2,000 3,000 Sales price per unit $10 $5 Variable per unit 7 3 In addition, the company incurred total fixed costs in the amount of $9,000. 38. Refer to Eclectic Corporation.. How many total units would the company have needed to sell to break even? a. 3,750 b. 750 c. 3,600 d. 1,800 ANS: A Let B = 1.5A 3A + 2(1.5A) - $9,000 = $0 6A - $9,000 = $0 A = 1,500 B = 2,250 Total units = 3,750 39. Refer to Eclectic Corporation. If the company would have sold a total of 6,000 units, consistent with CVP assumptions how many of those units would you expect to be Product B? a. 3,000 b. 4,000 c. 3,600 d. 3,500 ANS: C A + 1.5A = 6,000 units 2.5A = 6,000 units A = 2,400 units B = 3,600 units
20% CM increase: $40,000 * 1.20 = $48,000 Net profit: $(48,000 - 30,000) = $18,000 Increase in profit $8,000 $8,000/$10,000 = 80% Eclectic Corporation Eclectic Corporation manufactures and sells two products: A and B. The operating results of the company are as follows: Product A Product B Sales in units 2,000 3,000 Sales price per unit $10 $5 Variable per unit 7 3 In addition, the company incurred total fixed costs in the amount of $9,000. 38. Refer to Eclectic Corporation.. How many total units would the company have needed to sell to break even? a. 3,750 b. 750 c. 3,600 d. 1,800 ANS: A Let B = 1.5A 3A + 2(1.5A) - $9,000 = $0 6A - $9,000 = $0 A = 1,500 B = 2,250 Total units = 3,750 39. Refer to Eclectic Corporation. If the company would have sold a total of 6,000 units, consistent with CVP assumptions how many of those units would you expect to be Product B? a. 3,000 b. 4,000 c. 3,600 d. 3,500 ANS: C A + 1.5A = 6,000 units 2.5A = 6,000 units A = 2,400 units B = 3,600 units
Ch09%20Break-Even%20Point%20and%20Cost-Volume-Profit%20Analysis.docx