RETL 262 FINAL

*If fixed costs or variable cost increases without anything else increasing, you have to sell more to break even point so it increases *Everything stays the same but variable costs go up- break-even point increases *Fixed cost or variable cost same, but sales price goes up. Break even goes down

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Purchase or produce budget = sales + ending inventory - beginning inventory

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contribution margin income statement Sales (6000 x 60) 360,000 Variable Costs (6000 units x 15 per unit) -90,000 ------------ =270,000 (CM) -Fixed Costs -90,000 ------------ Profit (Net Income) =180,000

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Sales Price= $12 per unit. Variable costs= $9 per unit Fixed Costs= $60,000 VC % = 9/12=.75 75%

-BEP Units= 60,000/(12-9) = 60,000/3=20,000 units to break even -BEP $= 60,000/(100%-75%)= 60,000/.25= $240,000 worth of shirts selling 20,000 units x 12 per unit = 240,000 total selling or 240,000 total selling/12 per unit = 20,000 units

sales budget

-starting point (how much do you project sales will be for the next month, quarter, year, etc.) → accounts receivable → cash budget → expenses

fixed costs

-total fixed costs remain the same with changes in volume -fixed costs per unit decrease as volume increases

variable costs

-total variable costs increase as volume increases -variable cost per unit stays the same (consistent)

cost of goods sold %=

100%-gross margin %

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 3. What is contribution margin %?

100%-variable cost %=100-25=75% OR 45/60=75 (CM/sales)

7. How much do I need to sell in sales $ to make an after-tax profit of $168,000 if the tax rate is 30%?

168,000 after tax/(1-.3) = 168,000/.7 before tax = $240,000 before tax-target profit-NOT the answer) BE $= 90,000 fixed costs + 240,000 target profit/ 75% CM=440,000

How much do I need to sell in sales $ to make an after-tax profit of $168,000 if the tax rate is 30%?

168,000 after tax/(1-.3) = 168,000/.7 before tax = $240,000 before tax-target profit-NOT the answer) BE $= 90,000 fixed costs + 240,000 target profit/ 75% CM=440,000

Sales 200,000 Project-Sales will increase by 10%

200,000 x 1.10 = 20,000 increase Total 200,000+20,000=$220,000

Advertising Budget 40,000 Project-Sales will increase by 5%

40,000 x 1.05= 42,000 (Budgeted Advertising)

50,000 before taxes 20% tax rate 50,000 x .2 = 10,000 in taxes 50,000-10,000=40,000 after taxes

50,000 before taxes 20% tax rate 50,000 x .2 = 10,000 in taxes 50,000-10,000=40,000 after taxes

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 5. What is BEP in sales $?

BEP $ = 90,000/.75 = $120,000

Total fixed costs=40,000 Contribution margin %=32% of sales (DENOMINATOR-this is the CM %) What is BEP? (Can't find units)

BEP $= 40,000/32%=125,000

Total fixed costs= 56,000. Variable costs are 20% of sales. What is BEP? (Can't use units formula)

BEP $= 56,000/(100%-20%)= 56,000/.8= 70,000

bep $

BEP $= total fixed costs/(100% -variable cost %) Same as (Variable costs/sales)

Phone company sells its waterproof phone case for $90 per unit. Fixed costs total 162,000 and variable costs are 36 per unit. Determine the 1. Contribution margin per unit and 2. Break-even point in units S= 90 Fixed cost= 162,000 Variable cost=36 Variable cost %= variable cost/sales=36/90=.4

BEP units= 162,000/(90-36) = 162,000/54= 3,000 units QS 21-8 3000 x 90 = 270,000 dollars you need to sell to break even OR: BEP $= 162,000/(100%-40%)=162,000/.6=270,000

bep units

BEP units= total fixed costs/(sales price per unit-variable costs per unit) Same as (CM per unit)

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 4. What is BEP in units?

BEP units=90,000/45=2000 units

cash balance

Beginning Cash Budget + Cash Receipts (how much $ you will get-sales doesn't mean you'll get the cash that month) -Cash Disbursements = Ending Cash Balance

cash budgets

Beginning Cash Budget + Cash Receipts (how much $ you will get-sales doesn't mean you'll get the cash that month) -Cash Disbursements = Ending Cash Balance

contribution margin (CM) =

CM=sales-variable costs Total CM= total sales-total variable costs CM %= 100%-variable cost % Or CM/sales =C< % CM % + VC % = 100%

margin of safety

Margin of Safety= Current Sales - BEP (How many sales can you lose before net loss-how safe are you from BEP)

EI=10% of next month's sales October actual EI=40,000 units November sales=400,000 units December sales=350,000 units EI for November= 350,000 x .1 = 35,000 BI for November= 40,000 What is November's production/how many units should we plan to produce?

P= sales + EI - BI P=400,000 + 35,000 - 40,000 P=395,000 units to be produced in November

purchase or produce budget

Purchase= (Sales + EI) - BI

May's sales are projected to be 60,000 units. Ending Inventory for April=12,000 units. Projected Ending Inventory for May= 28,000 units How much Inventory should be purchased for May? (All in units not $) One month's ending is the next month's beginning**

Purchase= (Sales + EI) - BI Purchase= 60,000 + 28,000 - 12,000=76000 units to purchase for may

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 1. What is the contribution margin per unit?

S-VC=CM 60-15=45

how much do you need to sell for ___ profit

Units = (fixed cost+target profit)/CM per unit $=(fixed cost+target profit)/CM %

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 6. How much do I need to sell to make a profit of 180,000?

Units = (fixed cost+target profit)/CM per unit =(90,000 + 180,000)/45=6,000 units $=(fixed cost+target profit)/CM % $= (90,000 + 180,000)/.75= 360,000 units

How much do I need to sell to make a profit of $81,000? Anything above break even is a profit

Units=(fixed costs + target profit)/(sales price-variable cost per unit) Units=(162,000 +81,000)/(90-36)= 243/54=4,500 units $=(total fixed costs + target profit)/(100%-variable cost %) $=(162,000 + 81,000)/(100%-40%)=243,000/.6= 405,000

Sales (s)= 60 per unit Variable costs (VC)= 15 per unit Fixed costs (FC)= 90,000 total 2. What is the variable cost %?

VC/S=15/60=.25 (25%)

before tax amount=

after tax amount/(1-tax rate) 120,000 after tax, 25% tax rate 120,000/(1-.25)= 160,000 before tax

increases with volume, increase is not constant

c

master budget

collection of all budgets

remains constant all volume levels

fixed

relevant range

level of volume (production) where fixed costs remain fixed. Also the level where variable cost per unit stays the same -current capacity

has a component that remains some overall volume levels and another component that increases in direct proportion to volume increases

mixed costs

contribution margin

net sales-variable costs

financial budget

projected balance sheet

Operating Budget

projected income statement

net income

sales-variable costs (contribution margin) -fixed costs

2. How much of each product must be sold? (Sales Mix)

sales/total x BEP A: 64,000/160,000= .40 x 150,000 (BEP) = 60,000 A B: 24,000/160,000= .15 x 150,000 = 22,500 B C: 72,000/160,000= .45 x 150,000 = 67,500 C

remains constant, reaches the end of its limited range-changes by a lump sum and remains at that level until exceeding the next range

step-wise costs

BEP units =

total fixed costs/(sales price per unit-variable costs per unit)

BEP $ =

total fixed costs/100% -variable cost % -(Variable cost %=variable costs/sales)

ending inventory is always a cost

true

increases in direct proportion to volume

variable

break even point

zero profit, zero losses -sales revenue=total costs -sales revenue= total fixed costs + total variable costs