activities of the organization. (http://articles.getacoder.com/Limiting_Factor_Analysis_628617x1191737768.htm, July 2010) The most common limiting factor is the sales volume because a company cannot sell the entire product it manufactures and this analysis help companies to identify bottleneck resources and use best combination of available resources to maximize profit as well as limiting factor in an organization or a company. (http://articles.getacoder.com/Limiting_Factor_Analysis_628617x1191737768
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CHAPTER 9 Break-Even Point and Cost-Volume-Profit Analysis QUESTIONS 1. The variable costing income statement classifies costs by the way they behave. Variable costs are deducted from revenues to determine contribution margin and then fixed costs are deducted from contribution margin to determine operating profit. Break-even analysis involves a study of fixed costs, variable costs and revenues to determine the volume at which total costs equal total revenues. Hence, variable costing
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96122050 96122051 96122052 96122073 96122085 96122088 96122092 Group 1 Through our study of Salem Telephone Company (STC), we’re going to answer that if Salem Data Services (SDS) is really a profitable business to keep by using break-even point analysis. Before we come out the final solution, let’s discuss SDS’ accounting report step by step. First, we have to divide the various costs incurred in SDS into two types: variable costs and fixed costs. From Exhibit 2 we can see that only “Power” and
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Foreign Exchange Rates Contribution Analysis 1. Since the NZD price stayed the same but the exchange rate went down the Price in USD must increase to $108.70. The formula is: NZD price/exchange rate =125/1.15= $108.70 Since the US$ went up, the variable cost went up because the variable cost equals the old variable cost of $70 plus the new Us price minus the old: = 70+(108.70-100) = 78.70 Since $108.70-$78.70=$30 then there is no gain or loss to total contribution margin. 2. There will
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CASE BACKGROUND • Prestige Telephone Company (PTC) is the parent company of Prestige Data Services (PDS) • PDS provides data services to its parent company as well as other companies willing to hire its services • It is wholly owned by PTC, but runs as a separate business entity, so each pays the other for services received • It was conceptualized in 1994, and started operations in 1995 • Daniel Rowe, president of PTC, was the one who pitched PDS, and believes it could
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RJET 2 Task 4 Competition Bikes Inc (CB) is now making both CarbonLite and Titanium framed bikes and is therefore in need of re-tooling some of the current practices being used. The company currently uses a traditional based costing (TBC), however an activity based costing (ABC) may be more beneficial. Also, the company’s breakeven point with regards to cost volume profit for each bike type is in question, especially since there is the potential for a $50,000 increase to production facility and
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about internal pricing and, more generally, the operation of a decentralized management structure. Analysis 1: If we see the facts that came out in ensuing the discussion: [pic] It is obvious why ISD take Display tech as their supplier, a total cost difference of € 39,500. Thus, Heidelberg price would result in ISD negative gross margin. Even though if we look in terms of contribution margin, ISD will still get positive numbers if they took the display monitor from Heidelberg, but looking
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straight line. 2. If production does not equal sales, A. it must adjust the CVP formulas for that fact if it wishes to use CVP. B. it cannot use CVP, as an assumption is violated. C. a CVP analysis will always indicate a breakeven point that cannot be reached. D. the conclusions it draws from a CVP analysis will not be as sound as they would be if production equaled sales. 3. Profit is indicated on a cost-volume-profit graph by A. the profit line. B. the horizontal difference between the revenue
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PRESTIGE TELEPHONE COMPANY In deciding whether to continue, discontinue or sell a subsidiary company, we should consider the benefits and disadvantages of each option. We gauge the contribution of a subsidiary not only by looking at its profitability but also the advantage it can give to the parent company particularly in reducing its costs. Having a low profitability or even a net loss does not necessarily mean that the decision of retaining the subsidiary is wrong. Separating the relevant
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Cost Structure; Target Profit and Break Even Analysis Question 1: Compute Pittman Company’s break-even point in sales dollars for next year assuming: a. The agents’ commission remains unchanged at 15% $12,000,000 in sales is needed to break even while employing an outside sales force with commissions of 15% of sales. b. The agents’ commission rate is increased to 20% $13,714,286 in sales is needed to break even while employing an outside sales force with commissions of 20%
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