Question Description
Option #2: Comparative Cost-Volume-Profit Analysis Calculation
Phil Lesley, Controller, would like to complete a comparative cost-volume-profit analysis for the current year over the prior year for the chewing gum manufacturing plant to determine if the breakeven point was achieved, and how it may have differed between the two years.
Specific costs for production of 400,000 units each year, include the following:
| 2017 – Current Year | ||
|---|---|---|
| Chewing Gum Manufacturing Division Costs | Variable Costs Total | Fixed Costs Total |
| Raw materials | $ 250,000 | |
| Direct manufacturing labor | $ 110,000 | |
| Indirect manufacturing labor | $ 42,500 | |
| Factory Insurance & Utilities | $ 35,000 | |
| Depreciation — Machinery and factory | $ 48,500 | |
| Repairs and maintenance —factory | $ 8,000 | |
| Selling, marketing, and distribution expenses | $ 10,000 | $ 30,000 |
| General and administrative expenses | $ 50,000 | |
| 2016 – Prior Year | ||
| Chewing Gum Manufacturing Division Costs | Variable Costs Total | Fixed Costs Total |
| Raw materials | $ 245,000 | |
| Direct manufacturing labor | $ 105,000 | |
| Indirect manufacturing labor | $ 50,250 | |
| Factory Insurance & Utilities | $ 33,750 | |
| Depreciation — Machinery and factory | $ 38,500 | |
| Repairs and maintenance —factory | $ 14,000 | |
| Selling, marketing, and distribution expenses | $ 10,000 | $ 25,000 |
| General and administrative expenses | $ 60,000 |
There is no beginning or ending inventories. The total sales for 400,000 units produced are $1,050,000 for 2016 and $1,200,000 for 2017.
Using Microsoft Excel, answer the following questions for each year given the fact pattern above, showing all supporting calculations and labelling answers clearly. Please refer to CSU-Global Library (Links to an external site.) for Lynda.com tutorials on using Microsoft Excel or use the Excel Tutorials link found in the classroom if you need assistance.
- What is the contribution margin per unit for each multipack of gum produced given the fact pattern above?
- What is the breakeven point in units and dollars given the fact pattern above?
- What is the division’s margin of safety and degree of operating leverage given the fact pattern above?
- Create a very simple Excel table summarizing answers of each computation for each year. *Below the table in Excel, please write at least 3 observations you have regarding the data comparisons/contrasts.
Responses should be in complete sentences utilizing proper grammar. Your paper must be formatted according to CSU-Global Guide to Writing and APA Requirements (Links to an external site.).
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