Cost-Volume-Profit Analysis: Understanding Sheridan Company's Financial Data

To understand the financial position of Sheridan Company, particularly through the lens of Cost-Volume-Profit (CVP) analysis, we must delve into the key components of the company's financial data provided:

Sales:

The company's total sales amounted to $670,000.

Total Fixed Expenses:

Sheridan Company's total fixed expenses were $150,000.

Cost of Goods Sold:

The cost of goods sold for the company was $470,000.

Total Variable Expenses:

The total variable expenses incurred by Sheridan Company were $420,000.

Now, let's focus on the calculation of the contribution margin in the CVP income statement:

Contribution Margin Calculation:

The contribution margin in Cost-Volume-Profit (CVP) analysis is derived by subtracting the total variable expenses from the sales figure.

Based on the data provided:

Sales - $670,000

Total Variable Expenses - $420,000

Therefore, in the CVP income statement, the contribution margin for Sheridan Company would be:

$670,000 - $420,000 = $250,000.

It is important to note that gross profit cannot be calculated directly in a CVP income statement, as it focuses on the relationship between sales, variable costs, and contribution margin.

By understanding the contribution margin of $250,000, Sheridan Company can make informed decisions regarding pricing strategies, cost control measures, and overall profitability analysis.