SOLUTION

Last year Zimmer Co. sold 10,000 units that cost $40,000 to produce. This cost included $5,000 in fixed computer resource costs, $10,000 in fixed labor costs, and communication resource costs at $2.50 per unit. Resource (variable) costs are expected to be the same next year. Zimmer expects to sell 15,000 units. The sales manager predicts that next yearâ€™s cost will be $60,000.

Required:

Comment on the sales managerâ€™s cost prediction using CVP analysis.(Cost-Volume-Profit)

Solution:

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