Scent Fragrance Company manufactures and sells several ranges of perfumes. The Average revenue and cost of sales are as follows: Selling price per unit $20.00 Variable costs per unit: Direct materials $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 Required: a) Calculate the contribution margin per unit. b) Calculate the number of units Scent Fragrance Company must sell each year to break even. c) Calculate the number of units Scent Fragrance Company must sell to yield a profit of $144,000. d) Managers may use Sensitivity analysis in their accounting system. i) What is sensitivity analysis? ii) How is Sensitivity analysis useful to managers?
Scent Fragrance Company manufactures and sells several ranges of perfumes. The Average revenue and cost of sales are as follows: Selling price per unit $20.00 Variable costs per unit: Direct materials $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 Required: a) Calculate the contribution margin per unit. b) Calculate the number of units Scent Fragrance Company must sell each year to break even. c) Calculate the number of units Scent Fragrance Company must sell to yield a profit of $144,000. d) Managers may use Sensitivity analysis in their accounting system. i) What is sensitivity analysis? ii) How is Sensitivity analysis useful to managers?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 7BE
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Question
Scent Fragrance Company manufactures and sells several ranges of perfumes. The Average revenue and cost of sales are as follows:
Selling price per unit $20.00
Variable costs per unit:
Direct materials | $4.00 |
Direct manufacturing labor | $1.60 |
Manufacturing overhead | $0.40 |
Selling costs | $2.00 |
Annual fixed costs | $96,000 |
Required:
a) Calculate the contribution margin per unit.
b) Calculate the number of units Scent Fragrance Company must sell each year to break even.
c) Calculate the number of units Scent Fragrance Company must sell to yield a profit of $144,000.
d) Managers may use Sensitivity analysis in their accounting system.
i) What is sensitivity analysis?
ii) How is Sensitivity analysis useful to managers?
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