Cost-Volume-Profit Analysis CVP exercises The Deli-Sub Shop owns and operates six stores in and around Minneapolis. You are given the following corporate budget data for next year: Revenues $11,000,000
Fixed costs $3,000,000
Variable costs $7,500,000
Variable costs change based on the number of subs sold.
Use the blue shaded areas on the ENTERANSWERS tab for inputs. Always use cell references and formulas where appropriate to receive full credit. Cell references and formulas should be based on the original data. If you copy/paste from the Instructions tab you will be marked wrong.
Requirements Compute the budgeted operating income for each of the following deviations from the original budget data. (Consider each case independently.)
a. Enter all amounts as positive values. Do NOT use parentheses or a minus sign for amounts to be subtracted.
b. Refer to the budgeted operating income based on the original budget data in all calculations.
1 Determine the budgeted operating income based on the original budget data.
2 A 10% increase in contribution margin, holding revenues constant
3 A 10% decrease in contribution margin, holding revenues constant
4 A 5% increase in fixed costs
5 A 5% decrease in fixed costs
6 A 5% increase in units sold
7 A 5% decrease in units sold
8 A 10% increase in fixed costs and a 10% increase in units sold
9 A 5% increase in fixed costs and a 5% decrease in variable costs
10 Which of these alternatives yields the highest budgeted operating income?

The Deli-Sub Shop

1. Budgeted operating income based on the original budget data:

Revenues             $11,000,000

Variable costs       $7,500,000

Contribution         $3,500,000

Fixed costs           $3,000,000

Operating Income $500,000

2. 10% increase in contribution, holding revenues constant:

Revenues             $11,000,000

Variable costs       $7,150,000

Contribution         $3,850,000

Fixed costs           $3,000,000

Operating Income $850,000

3. A 10% decrease in contribution margin, holding revenues constant:

Revenues             $11,000,000

Variable costs       $7,850,000

Contribution          $3,150,000

Fixed costs           $3,000,000

Operating Income  $150,000

4. A 5% increase in fixed costs:

Revenues             $11,000,000

Variable costs       $7,500,000

Contribution         $3,500,000

Fixed costs            $3,150,000

Operating Income $350,000

5. A 5% decrease in fixed costs:

Revenues             $11,000,000

Variable costs       $7,500,000

Contribution         $3,500,000

Fixed costs           $2,700,000

Operating Income $800,000

6. A 5% increase in units sold:

Revenues             $11,550,000

Variable costs       $7,875,000

Contribution         $3,675,000

Fixed costs           $3,000,000

Operating Income $675,000

7. A 5% decrease in units sold:

Revenues             $10,450,000

Variable costs       $7,125,000

Contribution         $3,325,000

Fixed costs           $3,000,000

Operating Income $325,000

8. A 10% increase in fixed costs and a 10% increase in units sold:

Revenues             $12,100,000

Variable costs       $8,250,000

Contribution         $3,850,000

Fixed costs           $3,000,000

Operating Income $850,000

9. A 5% increase in fixed costs and a 5% decrease in variable costs:

Revenues             $11,000,000

Variable costs        $7,125,000

Contribution          $3,875,000

Fixed costs            $3,150,000

Operating Income $725,000

10. 2 A 10% increase in contribution margin, holding revenues constant

and

    8 A 10% increase in fixed costs and a 10% increase in units sold

Explanation:

a) Data and Calculations:

Corporate Budget:

Revenues            $11,000,000

Variable costs      $7,500,000

Contribution        $3,500,000

Fixed costs          $3,000,000

Operating Income $500,000

b) A 10% or 5% increase is multiplied by a factor of 1.1 or 1.05 while a 10% or 5% decrease is multiplied by a factor of 0.9 or 0.95 respectively.