Expert Answer:Accounting 202 Project 2 – CVP Analysis Assignment


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Accounting 202
Class time
Enter the last 4 digits of your student ID number:
(These digits will be used to for some variables in the project)
Save this file in EXCEL FORMAT as: P2Lastname
Highest =
Round all dollar amounts to whole dollars, except for per unit amounts. Per unit amounts should be
Lowest other than 0=
rounded to the nearest cent. Percentages should be rounded as follows: 20.75% or .2075
Do not change rows or colums on this spreadsheet. Input areas are in yellow.
You MUST show your work in the areas indicated to get credit for the problem.
You MUST use formulas and cell refereces in the income statements in Requirements 3 and 5 to earn full credit.
Presented below is Baron Company’s Income Statement prepared on the traditional (functional) basis:
Requirement 1: Replace the two unknown amounts (?) in A. and B. as directed. To find the unknown for B, you will have to
complete Requirement 2. Then, complete the totals on the income statement.
Baron Company
Income Statement
For the Year Ended December 31, 2018
Cost of Goods Sold
Direct Materials (variable)
Direct Labor (variable)
Manufacturing Overhead (mixed)
Gross Margin
Operating Expenses
Commissions (variable)
Shipping (variable)
Advertising (fixed)
Billing (mixed)
Sales and Administrative Salaries (fixed)
A. Multiply the HIGHEST digit entered above
above by 1,000 and enter here enter the result
B. Complete Requirement 2 below and insert result here
Total Operating Expenses
Net Operating Income (Loss)
Selling price per unit is $14 and variable manufacturing overhead is $1 per unit. All variable expenses in the company vary in terms of units sold.
There was no change in inventory levels between the beginning and end of the year. Baron’s plant capacity is 40,000 units per year (relevant range).
c. How many units of product did Baron sell in 2018?
Requirement 2:
Billing costs for the past 5 years, along with total units sold is presented
in the table to the right:
Sales in Units
Billing Costs
Use the high-low method to calculate the following:
Show your work in this area:
a. Variable billing cost per unit
b. Total fixed billing costs
c. Total cost equation for billing costs
d. Determine total billing costs for 2018 based on the cost equation in 2)c. above and the total number of units sold in 2018.
Insert your answer for 2)d. in the income statement above in the blank provided for Billing (Unknown B)
Page 1
The company has been operating at a loss for several years. Management is trying to determine what it can do to make next year
Requirement 3:
Redo Baron’s 2018 income statement in contribution format, showing both a total column and a per unit column in the space provided below.
You MUST use formulas and cell refereces in the income statement to earn full credit.
Hint: You will need to calculate the variable and fixed components of Manufacturing Overhead (MOH) and billing.
Total Units
Per Unit
Variable Costs
Direct materials
Direct Labor
Variable MOH
Sales commissions
Variable billing
Total Variable Costs
Contribution Margin
Fixed Costs
Fixed MOH
Sales and admn. salaries
Fixed billing
Total Fixed Costs
Net Operating Income (Loss)
Hint: Divide total cost column by total units to get VC per unit.
Hint: Operating Income (Loss) must equal the original income (loss) from above.
Requirment 4:
Calculate Baron’s current breakeven point in both units and dollars.
Show work in this area:
Requirement 5:
Multiply the lowest digit (other than zero) from the last four digits of your student ID number by 10,000 and
enter for C. below to get the reduction in advertising.
a. The vice president suggests that selling price be lowered by 10% and advertising be reduced by
She is confident that this action will increase sales volume by 25%.
The new selling price price per unit would be:
The new advertising amount would be:
Page 2
b. Prepare a budgeted margin income statement, using the vice president’s recommendation. Remember, when volume changes,
total variable costs change proportionately. To get total variable costs, multiply the per unit amounts from Requirement 3 by the new
number of units. (Remember, VC per unit remains constant, but total VC changes proportionately with changes in volume.
You MUST use formulas and cell refereces in the income statement to earn full credit.
Total Units
Variable Costs
Direct materials
Direct Labor
Variable MOH
Sales commissions
Variable billing
Total Variable Costs
Contribution Margin
Fixed Costs
Fixed MOH
Sales and admn. salaries
Fixed billing
Total Fixed Costs
Net Operating Income
Per Unit
New from Req. 5 above
Hint: Per unit Variable Costs are the same as the original income statement
as VC per unit remains constant with changes in volume. However
total variable costs will change
New from Req. 5 above
Requirement 6:
Using the budgeted income statement based on the vice president’s proposal above in Req. 5.b., calculate the following:
a. Breakeven in units:
Show your work in the areas provided
b. Margin of safety in units:
c. Margin of safety in dollars of sales:
d. Margin of safety percentage:
Requirement 7:
a. Calculate the operating leverage factor using the vice-president’s proposed income statement above.
Answer should use two decimal places.
Show your work in this area:
b. If sales volume increases 12%, operating income will increase by:
Page 3

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