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Bravo Company Widgets: CVP Analysis and Break-even Point

## Question 1: Determining the number of units of Widgets required to achieve operating income goal

1.Bravo Company sells Widgets at \$6 a unit. In FY 2016, fixed costs are expected to be \$200,000 and variable costs are estimated to increase from \$3 per unit to \$4 a unit. Bravo wants to have a FY 2016 operating income of \$40,000. Use this information to determine the number of units of Widgets that Bravo must sell in FY 2016 to meet this goal. (Round any total dollar value to the nearest whole dollar & enter as whole dollars only. Round any unit dollar value to the nearest penny & enter with both dollar(s) & cents. Round any unit non-dollar decimal numbers to the next higher whole number and enter as a whole number.)

2. During FY 2016, Bravo Company plans to sell Widgets for \$5.00 a unit. Current variable costs are \$3.00 a unit and fixed costs are expected to increase to a total of \$100,000. Use this information to determine for FY 2016:

1. the number of units of Widgets for Bravo to breakeven

2. the total dollar value of sales that Bravo must achieve to breakeven

(Round any total dollar value to the nearest whole dollar & enter as whole dollars only. Round any unit dollar value to the nearest penny & enter with both dollar(s) & cents. Round any unit non-dollar decimal numbers to the next higher whole number and enter as a whole number

3.For FY 2016 Bravo Company's CVP format Income Statement is as follows:

 Bravo Company Income Statement (CVP format) For the Year Ended 12/31/16 Sales (100 units) \$10,000 Variable Costs: Direct Labor \$1,500 Direct Materials 1,400 Factory Overhead (variable) 1,000 Selling Expenses (variable) 600 Administrative Expenses (variable) 500 Total Variable Expenses 5,000 Contribution Margin \$5,000 Fixed Costs: Factory Overhead (fixed) \$500 Selling Expenses (fixed) 1,000 Administrative Expenses (fixed) 1,000 Total Fixed Expenses 2,500 Net Income (aka Operating Income) \$2,500

Bravo utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Bravo Company expects that all costs will remain the same for FY 2017 with the exception of fixed factory overhead which is budgeted to increase by \$1,700. Use this information to determine:

1. FY 2016 Cost of Goods Sold

2. FY 2016 breakeven point in units

(Round any total dollar value to the nearest whole dollar & enter as whole dollars only. Round any unit dollar value to the nearest penny & enter with both dollar(s) & cents. Round any unit non-dollar decimal numbers to the next higher whole number and enter as a whole number.)

4. Alpha Company has two service departments (Cafeteria Services & Maintenance Services). Alpha has two production departments (Printing Department & Binding Department.) Cafeteria Services has costs of \$140,000 and are allocated to production departments based on their number of employees. Employees are:

Cafeteria Services         2

## Question 2: Calculating the break-even point for Bravo Company's Widgets

Maintenance Services        2

Printing Department          4

Binding Department          8

Alpha uses the direct method for service cost allocation. Use this information to determine for Alpha Company the dollar amount of its Cafeteria costs that are to be absorbed by: . (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)

1. the Maintenance Service Department

2. the Printing Department

3. the Binding Department

5. Alpha Company has two service departments (Cafeteria Services & Maintenance Services). Alpha has two production departments (Printing Department & Binding Department.) Cafeteria Services has costs of \$140,000 and are allocated to production departments based on their number of employees. Employees are:

Cafeteria Services         2

Maintenance Services        2

Printing Department          4

Binding Department          8

Alpha uses the step method for service cost allocation. Use this information to determine for Alpha Company the dollar amount of its Cafeteria costs that are to be absorbed by: (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)

1. the Printing Department

2. the Binding Department

6.During FY 2016, Bravo Company sold 16,000 units for \$84,000.  Bravo had \$2.75 variable costs per unit sold.  Bravo also reported \$28,000 of fixed costs.  Use this information to determine FY 2016:

1. Contribution Margin per unit

2. Breakeven in Units

3. Breakeven in Total Sales

(Round any total dollar value to the nearest whole dollar & enter as whole dollars only. Round any unit dollar value to the nearest penny & enter with both dollar(s) & cents. Round any unit non-dollar decimal numbers to the next higher whole number and enter as a whole number.)

7. Baltimore Manufacturing Company just completed its year ended December 31, 2019.  Depreciation for the year amounted to \$130,000: 30% relates to sales, 20% relates to administrative facilities, and the remainder relates to the factory.  Of the total units produced during FY 2019: 85% were sold in 2019 and the rest remained in finished good inventory. Use this information to determine the dollar amount of the total depreciation that will be contained in Cost of Goods Sold.  (Round dollar values & enter as whole dollars only.)

8. Baltimore Manufacturing had a Work in Process balance of \$109,000 on January 1, 2018. The year end balance of Work in Process was \$94,000 and the Cost of Goods Manufactured was \$640,000. Use this information to determine the total manufacturing costs incurred during the fiscal year 2018. (Round dollar values & enter as whole dollars only.)

9. Annapolis Clothing Company manufactures quality boating attire.  The following selected financial information for the fiscal year 2018 is provided:

 Item Amount Sales \$200,000 Cost of Goods Manufactured 40,000 Direct Material Purchased 80,000 Factory Overhead 20,000 Work in Process - January 1 60,000 Work in Process - December 31 30,000 Direct Material - December 31 20,000 Finished Goods Inventory - December 31 44,000 Net Income 30,000 Direct Materials used 60,000 Cost of Goods Sold 52,000

Use this information to determine the dollar amount of Annapolis Clothing's Finished Goods Inventory for January 1, 2018. (Round dollar values & enter as whole dollars only.)

10. During FY 2018 Bay Manufacturing had total manufacturing costs are \$406,000. Their cost of goods manufactured for the year was \$437,000.  The January 1, 2019 balance of Work-in-Process Inventory is \$52,000. Use this information to determine the dollar amount of the FY 2018 beginning Work-in-Process Inventory. (Round dollar values & enter as whole dollars only.)