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Item 10

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Learning Objective 05-C2: Describe several applications of cost-volume-profit analysis.

Cost-volume-profit analysis can be used to predict what can happen under alternative strategies concerning sales volume, selling prices, variable costs, or fixed costs. Applications include “what-if” analysis, computing sales for a target income, and break-even analysis.

Computing Income from Sales and Costs – Dollar Sales

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Knowledge Check 01

CompuTop Company sells toy laptop computers for $30 each. If the variable cost for each laptop is $20 and fixed costs total $25,000, how much sales in dollars must it sell to generate a target income of $66,667? (Round your intermediate answers to 1 decimal place and your final answer to a whole dollar.)

• $7,500

• $9,167

• $225,225

• $275,276

rev: 10_11_2019_QC_CS-185767

Answer 1

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Answer is Option D) $275,276 Selling price Variable cost Contribution per unit Contribution Margin % (Contribution/Sales)% $30 $20 $10 33.3% Fixed cost Net Income Total Target $25,000.0 $66,667.0 $91,667.0 Total Sales needed Total Target Contribution Margin % $91,667.0 33.30% $275, 276