Question

Need help with this accounting problem.

Required information Problem 21-3A CVP analysis and charting LO P2, P3 [The following information applies to the questions displayed below.) Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $310 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $421,600, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $186 per 100 yards of XT rope.

Answer 1

Selling price per unit = $310

Variable cost per unit = $186

Fixed costs = $421,600

1.

Contribution Margin	per 100 yds.
Selling price per unit	310
Variable cost per unit	-186
Contribution Margin	$124

Contribution margin ratio
Choose Numerator	/	Choose Denominator	=	Contribution Margin Ratio
Contribution Margin per unit	/	Selling price per unit	=	Contribution margin ratio
124	/	310	=	40%

1. (a)

Choose Numerator	/	Choose Denominator	=	Break even units
Fixed cost	/	Contribution margin per unit	=	Break even units
421,600	/	124	=	3,400 units

(b)

Choose Numerator	/	Choose Denominator	=	Break even dollars
Fixed cost	/	Contribution margin ratio	=	Break even dollars
421,600	/	40%	=	1,054,000

3.

PRAVEEN CO.
Contribution Margin Income Statement ( at Break-even)-Product XT
	Units	$ per unit	Total
Sales	3,400	310	1,054,000
Variable cost	3,400	186	-632,400
Contribution Margin			421,600
Fixed cost			-421,600
Operating Income			$0

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