ACC 561 2-65 CVP and Break-Even Phonetronix is a small manufacturer of telephone and communications devices

ACC 561 2-65 CVP and Break-Even Phonetronix is a small manufacturer of telephone and communications devices

Introduction to Management Accounting : Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008).

Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.

Axia College of University of Phoenix (UoP)

EXCEL Application Exercise, CVP and Break-Even, on p. 89

2-65 CVP and Break-Even

ACC 561 2-65 CVP and Break-Even Phonetronix is a small manufacturer of telephone and

Goal: Create an Excel spreadsheet to perform CVP analysis and show the relationship between price, costs, and break-even points in terms of units and dollars. Use the results to answer questions about your findings.

Scenario: Phonetronix is a small manufacturer of telephone and communications devices. Recently, company management decided to investigate the profitability of cellular phone production. They have three different proposals to evaluate. Under all the proposals, the fixed costs for the new phone would be $110,000. Under proposal A, the selling price of the new phone would be $99 and the variable cost per unit would be $55. Under proposal B, the selling price of the phone would be $129 and the variable cost would remain the same.

Under proposal C, the selling price would be $99 and the variable cost would be $49.

When you have completed your spreadsheet, answer the following questions:

1. What are the break-even points in units and dollars under proposal A?

2. How did the increased selling price under proposal B impact the break-even points in units and dollars compared to the break-even points calculated under proposal A?

3. Why did the change in variable cost under proposal C not impact the break-even points in units and dollars as significantly as proposal B did? SOLUTION