Please help Problem 18-2A CVP analysis and charting P2 P3 Xcite Equipment Co. ma
ID: 2565488 • Letter: P
Question
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Problem 18-2A CVP analysis and charting P2 P3 Xcite Equipment Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be pre cisely measured. Next year's plans call for a $200 selling price per 100 yards of XT rope. Its fixed costs for the ycar are expected to be $270,000, up to a maximum capacity of 700,000 yards of rope. Forecasted variable costs are $140 per 100 yards of XT rope mhhe.com/wildFINMAN5e Required Check ) Break-even sales 4,500 units 1. Estimate Product XT's break-even point in terms of (a) sales units and (b) sales dollars 2. Prepare a CVP chart for Product XT like that in Exhibit 18.15. Use 7,000 units (700,000 yards/100 yards) as the maximum number of sales units on the horizontal axis of the graph, and $1,400,000 as the maximum dollar amount on the vertical axis 3. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.Explanation / Answer
Break -even in sales units Fixed Costs 270,000 Contribution margin per units(200-140) 60 Break -even in Point units 4,500 Break -even in sales Dollar Fixed Costs 270,000 Contribution margin ratio(60/200)*100 30% Break -even in Point units 900,000 Xcite Equipment Co Contribution margin income statement At breake even Sales 900,000 Variable cost 630,000 Contribution margin 270,000 Fixed Costs 270,000 Net Income -