Cost-Volume-Profit Relationships Solutions to Questions 6-1 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can be used in a variety of ways. For example, the change in total contribution margin from a given change in total sales revenue can be estimated by multiplying the change in total sales revenue by the CM ratio. If fixed costs do not change, then a dollar increase in contribution margin will result in a dollar increase in net operating income
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000 at 2,000 units, and $9,200 at 3,000 units. This cost is a Question 3 options: | |mixed cost | | |step cost | | |variable cost | | |fixed cost | Question 4 (1 point) [pic] Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $195,300, how many dollars of revenue must the company generate in order to reach the break-even point? Your Answer:Question 4 options: | | |Answer | Question 5 (1 point) [pic] Tim
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The Basic Profit Equation: Cost-Volume-Profit analysis (CVP) relates the firm’s cost structure to sales volume and profitability. A formula that facilitates CVP analysis can be easily derived as follows: Profit = Sales – Expenses Profit = Sales – (Variable Costs + Fixed Costs) Profit + Fixed Costs = Sales – Variable Costs Profit + Fixed Costs = Units Sold x (Unit Sales Price – Unit Variable Cost) This formula is henceforth called the Basic Profit Equation and is abbreviated:
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38.For an activity base to be useful in cost behavior analysis, a.the activity should always be stated in dollars. b.there should be a correlation between changes in the level of activity and changes in costs. c.the activity should always be stated in terms of units. d.the activity level should be constant over a period of time. Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics
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defined geographical limits. Airwide International is envisioning three-year business plan and improving contribution margin from 38 percent to 40 percent has been one of the key goals. Not addressing the issue with Italy market, which is the largest in the western region of Europe, might be catastrophic to their 3 year plan. Analysis: Airwide International wants to increase their contribution margin in the next three year by 2
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explanation of contribution margins, a determination of an annual break-even point, and operating income of Andre’s Hair Styling with calculations supporting answers. All calculations of business are based on each barber being paid $9.90 per hour working 40 hours per week and 50 weeks per year. Rent and other expenses equal $1,750.00 per month. Expenses include forty cents per client for shampoo, while services include haircuts priced at twelve dollars each. A revised or new contribution method, where
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MBA 507: Managerial Finance Lecture 7 Cost-‐Volume-‐Profit Analysis & Managerial Decision Making Mario Fonseka FCMA(UK), CGMA (US), Dip. M (UK), FCMA(SL), MBA (USJ), CerGfied Psychometrician (BPS) Saturday, September 20, 14 Cost-Volume-Profit Analysis Saturday, September 20, 14 Cost-Volume-Profit Analysis CVP Analysis is based on the relationship between sales revenue, costs and profit in the short run, in which
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Competition Bikes (CB) is making CarbonLite and Titanium bikes. To streamline cost there need to be an investigation into which practice is most efficient and cost effective for the CB. Competition Bikes is using a traditional based costing (TBC). There needs to be a comparison between the current use of TBC and activity based costing (ABC) to decide which is most beneficial to the company. Also, the breakeven point to cost volume profit needs to be evaluated. There is a potential for a $50,000 increase
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Costing Method: The excel document title, “JET2 Task 1-4 Workbook” and tabs ‘Task 4 Cost-Volume-Profit’, and “Task 4 Activity Based Costing” is where the information is derived from and recommendations will be made based off of the information in these tabs. The excel document title, “JET2 Task 1-4 Workbook” and tab ‘Task 4 Cost-Volume-Profit’ highlights two unit costs methods: traditional and activity based. Each unit cost method will be analyzed and a recommendation will be made regarding
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#1 Why does the manufacturing industry use job order cost system? A Job order Why do some professional firms use job order cost system? Give 2 professional firms to use job order cost system for example. A job order is a cost accounting method that focuses in quantity of product known as a job or lot. The costs of direct materials, direct labor, and manufacturing overhead applicable to each job are compiled to arrive at average unit cost, (p.778, Williams, 2012). Characteristics | Job Order
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