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Chapter 20: Q26RQ (page 1120)

How can CVP analysis be used by companies with multiple products?

Short Answer

Expert verified

The combination of products used that sums up total sales is known as the sales mix.

Step by step solution

01

Meaning of Sales mix

The sales mix refers to the assortment of products utilized to calculate total sales. To calculate the CVP for sales mix same formulas can be used with multiple products.

02

How can companies with multiple products use CVP analysis.

Companies can use the weighted-average contribution margin of all the company’s products to calculate CVP analysis. In addition, it helps the company to minimize the labor, and time and they also get to know which product would be the most profitable

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Most popular questions from this chapter

A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to Store #36 located in Atlanta, Georgia, is the manager’s salary fixed or variable? Why?

Calculating breakeven sales and sales to earn a target profit;preparing a contribution margin income statement

Famous Productions performs London shows. The average show sells 1,000 ticketsat \(60 per ticket. There are 175 shows a year. No additional shows can be held as thetheater is also used by other production companies. The average show has a cast of60, each earning a net average of \)320 per show. The cast is paid after each show. Theother variable cost is a program-printing cost of \(8 per guest. Annual fixed costs total\)459,200.

Requirements

1. Compute revenue and variable costs for each show.

2. Use the equation approach to compute the number of shows Famous Productionsmust perform each year to break even.

3. Use the contribution margin ratio approach to compute the number of showsneeded each year to earn a profit of $4,264,000. Is this profit goal realistic? Giveyour reasoning.

4. Prepare Famous Productions’s contribution margin income statement for 175shows performed in 2018. Report only two categories of costs: variable andfixed.

What is a fixed cost? Give an example.

Question: What is target profit?

Calculating contribution margin

Glenn Company sells a product for \(80 per unit. Variable costs are \)60 per unit, and fixed costs are $800 per month. The company expects to sell 560 units in September. Calculate the contribution margin per unit, in total, and as a ratio.
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