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Homework (Week 1)
Cost Accounting (ACCT 321)
Cost-Volume-Profit Analysis
1. Kruez & Company produces valves for the widget industry. Kruez's per unit sales price
and variable costs are as shown.
Sales price $12
Variable costs 8
Kruez’s practical capacity is 40,000 units. Its total fixed costs aggregate $48,000 and it has a
40% effective tax rate.
The maximum net profit that Kruez can earn is:
a. $48,000.
b. $67,200.
c. $96,000.
d. $112,000.
2. 2. Bill Miller’s Corporation makes two types of widgets for use in various products.
Operating data and unit cost information for its products are presented next.
Product A Product B
Annual unit capacity 10,000 20,000
Annual unit demand 10,000 20,000
Selling price $100 $80
Variable manufacturing cost 53 45
Fixed manufacturing cost 10 10
Variable selling and
administrative
10 11
Fixed selling and administrative 5 4
Fixed other administrative 2 0
Unit operating profit $20 $10
Machine hours per unit 2.0 1.5
3. Bill Miller’s has 40,000 productive machine hours available. The relevant contribution
margins, per machine hour for each product, to be utilized in making a decision on product
priorities for the coming year, are
Product A Product B
a. $17.00 $14.00
b. $18.50 $16.00
c. $20.00 $10.00
d. $37.00 $24.00
3. San Antonio Company produces accounting software. Its unit cost structure, based on an
anticipated production volume of 150,000 units, is:
Sales price $160
Variable costs 60
Fixed costs 55
The marketing department has estimated sales for the coming year at 175,000 units, which
is within the relevant range of San Antonio's cost structure. San Antonio's breakeven volume
(in units) and anticipated operating income for the coming year would amount to
a. 82,500 units and $7,875,000 of operating income.
b. 82,500 units and $9,250,000 of operating income.
4. c. 96,250 units and $3,543,750 of operating income.
d. 96,250 units and $7,875,000 of operating income.
