{"id":404,"date":"2018-04-17T21:20:14","date_gmt":"2018-04-17T21:20:14","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=404"},"modified":"2024-04-29T16:54:25","modified_gmt":"2024-04-29T16:54:25","slug":"variable-cost-fixed-cost-and-sales-volume-in-statements","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/variable-cost-fixed-cost-and-sales-volume-in-statements\/","title":{"raw":"Statement of Variable Cost, Fixed Cost, and Sales Volume","rendered":"Statement of Variable Cost, Fixed Cost, and Sales Volume"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Prepare a statement that shows a change in variable cost, fixed cost, and sales volume<\/li>\r\n<\/ul>\r\n<\/div>\r\nAs if competition and fixed cost increases weren\u2019t enough, now we just found out our best supplier is raising the cost of a component of our best-selling widget. With the new company also using parts, there is a shortage, giving our supplier the opportunity to get a little more for his parts. Your boss is now in major crisis mode, trying to figure out a way to continue to show a profit with potential lower sales volumes and increasing prices for every imaginable thing! Of course this lands on your shoulders, so let\u2019s get busy.\r\n\r\nSo now we have:\r\n<ol>\r\n \t<li>A lower selling price at $8 per widget<\/li>\r\n \t<li>Higher fixed costs at $440 per month<\/li>\r\n \t<li>Higher variable costs at $5.50 per widget<\/li>\r\n<\/ol>\r\nIt looks as if everything that could go wrong, has gone wrong! \u00a0Here is the bad news in chart form:\r\n<div>\r\n<table>\r\n<thead>\r\n<tr>\r\n<th colspan=\"6\">Cost-Volume-Profit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th colspan=\"6\">Monte Corporation<\/th>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Number Sold<\/th>\r\n<td>1<\/td>\r\n<td>50<\/td>\r\n<td>100<\/td>\r\n<td>150<\/td>\r\n<td>200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Price per Item<\/th>\r\n<td>$8<\/td>\r\n<td>$400<\/td>\r\n<td>$800<\/td>\r\n<td>$1,200<\/td>\r\n<td>$1,600<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Variable cost per item<\/th>\r\n<td>$6<\/td>\r\n<td>$275<\/td>\r\n<td>$550<\/td>\r\n<td>$825<\/td>\r\n<td>$1,100<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Contribution Margin<\/th>\r\n<td>$3<\/td>\r\n<td>$125<\/td>\r\n<td>$250<\/td>\r\n<td>$375<\/td>\r\n<td>$500<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Fixed Costs<\/th>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Profit (loss)<\/th>\r\n<td>($438)<\/td>\r\n<td>($315)<\/td>\r\n<td>($190)<\/td>\r\n<td>($65)<\/td>\r\n<td>$60<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nLet\u2019s expand our chart a bit now, and see how we can improve profits:\r\n<div>\r\n<table>\r\n<thead>\r\n<tr>\r\n<th colspan=\"8\">Cost-Volume-Profit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th colspan=\"8\">Monte Corporation<\/th>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Number Sold<\/th>\r\n<td>1<\/td>\r\n<td>50<\/td>\r\n<td>100<\/td>\r\n<td>150<\/td>\r\n<td>200<\/td>\r\n<td>250<\/td>\r\n<td>300<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Price per Item<\/th>\r\n<td>$8<\/td>\r\n<td>$400<\/td>\r\n<td>$800<\/td>\r\n<td>$1,200<\/td>\r\n<td>$1,600<\/td>\r\n<td>$2,000<\/td>\r\n<td>$2,400<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Variable cost per item<\/th>\r\n<td>$6<\/td>\r\n<td>$275<\/td>\r\n<td>$550<\/td>\r\n<td>$825<\/td>\r\n<td>$1,100<\/td>\r\n<td>$1,375<\/td>\r\n<td>$1,650<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Contribution Margin<\/th>\r\n<td>$3<\/td>\r\n<td>$125<\/td>\r\n<td>$250<\/td>\r\n<td>$375<\/td>\r\n<td>$500<\/td>\r\n<td>$625<\/td>\r\n<td>$750<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Fixed Costs<\/th>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<td>$440<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Profit (loss)<\/th>\r\n<td>($438)<\/td>\r\n<td>($315)<\/td>\r\n<td>($190)<\/td>\r\n<td>($65)<\/td>\r\n<td>$60<\/td>\r\n<td>$185<\/td>\r\n<td>$310<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nIf we sell more product, we can make more money! Now, you will need to figure out how to make that happen!\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/5e1f38cf-5dec-4587-b72e-dca475ceb885\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Prepare a statement that shows a change in variable cost, fixed cost, and sales volume<\/li>\n<\/ul>\n<\/div>\n<p>As if competition and fixed cost increases weren\u2019t enough, now we just found out our best supplier is raising the cost of a component of our best-selling widget. With the new company also using parts, there is a shortage, giving our supplier the opportunity to get a little more for his parts. Your boss is now in major crisis mode, trying to figure out a way to continue to show a profit with potential lower sales volumes and increasing prices for every imaginable thing! Of course this lands on your shoulders, so let\u2019s get busy.<\/p>\n<p>So now we have:<\/p>\n<ol>\n<li>A lower selling price at $8 per widget<\/li>\n<li>Higher fixed costs at $440 per month<\/li>\n<li>Higher variable costs at $5.50 per widget<\/li>\n<\/ol>\n<p>It looks as if everything that could go wrong, has gone wrong! \u00a0Here is the bad news in chart form:<\/p>\n<div>\n<table>\n<thead>\n<tr>\n<th colspan=\"6\">Cost-Volume-Profit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th colspan=\"6\">Monte Corporation<\/th>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Number Sold<\/th>\n<td>1<\/td>\n<td>50<\/td>\n<td>100<\/td>\n<td>150<\/td>\n<td>200<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Price per Item<\/th>\n<td>$8<\/td>\n<td>$400<\/td>\n<td>$800<\/td>\n<td>$1,200<\/td>\n<td>$1,600<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Variable cost per item<\/th>\n<td>$6<\/td>\n<td>$275<\/td>\n<td>$550<\/td>\n<td>$825<\/td>\n<td>$1,100<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Contribution Margin<\/th>\n<td>$3<\/td>\n<td>$125<\/td>\n<td>$250<\/td>\n<td>$375<\/td>\n<td>$500<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Fixed Costs<\/th>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Profit (loss)<\/th>\n<td>($438)<\/td>\n<td>($315)<\/td>\n<td>($190)<\/td>\n<td>($65)<\/td>\n<td>$60<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Let\u2019s expand our chart a bit now, and see how we can improve profits:<\/p>\n<div>\n<table>\n<thead>\n<tr>\n<th colspan=\"8\">Cost-Volume-Profit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th colspan=\"8\">Monte Corporation<\/th>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Number Sold<\/th>\n<td>1<\/td>\n<td>50<\/td>\n<td>100<\/td>\n<td>150<\/td>\n<td>200<\/td>\n<td>250<\/td>\n<td>300<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Price per Item<\/th>\n<td>$8<\/td>\n<td>$400<\/td>\n<td>$800<\/td>\n<td>$1,200<\/td>\n<td>$1,600<\/td>\n<td>$2,000<\/td>\n<td>$2,400<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Variable cost per item<\/th>\n<td>$6<\/td>\n<td>$275<\/td>\n<td>$550<\/td>\n<td>$825<\/td>\n<td>$1,100<\/td>\n<td>$1,375<\/td>\n<td>$1,650<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Contribution Margin<\/th>\n<td>$3<\/td>\n<td>$125<\/td>\n<td>$250<\/td>\n<td>$375<\/td>\n<td>$500<\/td>\n<td>$625<\/td>\n<td>$750<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Fixed Costs<\/th>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<td>$440<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Profit (loss)<\/th>\n<td>($438)<\/td>\n<td>($315)<\/td>\n<td>($190)<\/td>\n<td>($65)<\/td>\n<td>$60<\/td>\n<td>$185<\/td>\n<td>$310<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>If we sell more product, we can make more money! Now, you will need to figure out how to make that happen!<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_5e1f38cf-5dec-4587-b72e-dca475ceb885\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/5e1f38cf-5dec-4587-b72e-dca475ceb885?iframe_resize_id=assessment_practice_id_5e1f38cf-5dec-4587-b72e-dca475ceb885\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-404\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Statement of Variable Cost, Fixed Cost, and Sales Volume. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":12,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Statement of Variable Cost, Fixed Cost, and Sales Volume\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"dc56bf57-db2b-4204-86cd-956f645aef7f, 32f33a6c-389e-48db-a2a1-ab83e1d5c8a5","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-404","chapter","type-chapter","status-publish","hentry"],"part":107,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/404","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":10,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/404\/revisions"}],"predecessor-version":[{"id":4090,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/404\/revisions\/4090"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/107"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/404\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=404"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=404"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=404"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=404"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}