 Cost Volume Profit case study , accounting homework help

Accounting

### Question Description

700 word paper addressing the below on a given scenario. More detailed information on attachement.

• Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used.
• Compute the margin of safety ratio for current operations and after Mary's changes are introduced (Round to nearest full percent).
• Prepare a CVP (Cost-Volume-Profit) income statement for current operations and after Mary's changes are introduced.
• Explain whether Mary's changes should be adopted. Why or why not? Analyze the above information (three bullet points above) and use this information to support your suggestion.

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I.

Introduction

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Conclusion

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References

Running head: COST VOLUME PROFIT CASE STUDY

Cost Volume Profit Case Study
Name
Institution

COST VOLUME PROFIT CASE STUDY

2

Cost Volume Profit Case Study
Compute the current break-even point in units, and compare it to the break-even point in
units if Mary's ideas are used.

Contribution Margin per Unit = (40-24) = 16
Break even points in form of dollars = 16x 20,000 = 320,000
Break even = (320,000 – 270,000) = \$ 50,000/ 320,000 = 15.625%
270,000/16 = 16,875
Current Break-even = 16,875 pair of shoes

Proposed = (24,000+270,000) = 294,000
Margin = 14 x 19,000= 266,000
Break-even = 28,000
28,000/ 266,000 = 1.07%
New Breakeven point = 294,000/ 14 = 21000 units
Compute the margins of safety ratio for current operations and after Mary’s changes are
introduced (Round to nearest full percent)

Current Margin Safety Ratio = (270,000 + (20,000 x24)) = \$ 750,000/46,875 = 16%

New Margin Safety Ratio = (266,000 + (24,000 x 24)) = \$ 842,000/ 64,679 = 13%

Prepare a CVP (Cost-Volume-Profit) income statement for current operations and after
Mary's changes are introduced
BARGAIN SHOE STORE CVP INCOME STATEMENT
Sales

Current
\$ 80,000

New
\$ 91,200

COST VOLUME PR... peachblack (34737)
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