profit and loss data (Exhibits 1 and 2), do you agree with Waters’ decision to keep product 103? Analysis of product one reveals that based on variable cost, product 103 generates contribution of $13.726 million. Moreover, the avoidable fixed cost of producing product 103 is $8.793 million that is general administrative cost, selling cost and indirect labor cost. Therefore, product 103 generates net contribution of $4.933 million through sales of 986,974 units of product 103 during the year 2004. However
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Profit (CVP) Formulas: Contribution margin = Sales - Variable expenses (manufacturing and non-manufacturing) Net operating income = Contribution margin - Fixed expenses (manufacturing and nonmanufacturing) Contribution margin ratio = Contribution margin / Sales Break even point (units) = Fixed expenses / Unit contribution margin Break even point (dollar sales) = Fixed expenses / CM ratio Units sales to attain target profit = (Fixed expenses + Target profit) / Unit contribution margin Dollar sales
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the formula that you used in your computation. For example, the formula used to determine the contribution margin ratio (part a) is: |Contribution Margin Ratio |= |Unit Sales Price – Variable Costs per Unit | | | |Unit Sales Price | a. Contribution margin ratio. b. Sales volume (in dollars) required to break even. c. Sales volume (in
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Cost-Volume-Profit (CVP) Analysis considers the impact that changes in output have on revenue, costs, and net income. In applying CVP Analysis, costs are separated into variable and fixed costs. This distinction is important because, as mentioned previously, variable costs change with changes in output, whereas fixed costs remain constant throughout what is referred to as a relevant range. CVP analysis is based on the following equation: Profit = Total Revenues - Total variable costs - Total fixed
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being unreliable. Max had another approach. He stated that they should concentrate on the more profitable products and drop some of the less profitable ones to free up resources. He is going to have the accounting department draw up a profitability analysis to help figure out which products to concentrate on. He also is thinking about ways to free up time in the coating process. They agreed to meet early the next month to get a handle on how to deal with the constraints. Max and Betty would like
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Paso, Texas MST Financial Analysis RJET Task 4 To: Mr. Vice President From: Jorge Felix, CBI Analyst RE: Summary report As directed by you, please read below my analysis and recommendations for Competition Bikes Inc. Since the company has retooled and is making both the Carbon Lite and the Titanium frame bikes. I will be analyzing the results of your directed activity-based costing analysis was undertaken in one of the company plants. After the study, a breakeven analysis was completed along with
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costs and fixed costs. 5.3) a. The cost volume profit analysis is an analytical technique that is used to analyze the effects of changes in volume on revenue, costs and profit. It is also known as (CVP). b. (CVP) is useful in health service managers because it helps keep a close watch on changes in the amount of revenues, costs and profits that goes on in the business in order to stay successful and competitive. 5.4) a. Contribution margin is the difference between unit price and the variable
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CAMBRIDGE SOFTWARE CORPORATION: QUANTITATIVE ANALYSIS Learning Objectives: Benefits of product variety Factors limiting product variety Strategic considerations in product-line pricing III. Quantitative Analysis: We will first consider the product-line design and pricing decisions for the case when CSC can offer only one version. In this case, the product-line design only involves selecting the “right” version to offer. Note further that targeting/positioning decision is synonymous
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Victoria Magazines Ltd is considering launching a new monthly magazine at a selling price of £1 per copy. Sales of the magazine are expected to be 500,000 copies per month, but it is possible that the actual sales could differ quite significantly from this estimate. Two different methods of producing the magazine are being considered and neither would involve any additional capital expenditure. The estimated production costs for each of the two methods of manufacture, together with the
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Financial Analysis Task 4 A1. Costing Method In order for a company to succeed and be successful, it is very important for the company to understand the difference between profit and cost of goods. There are costing tools that can help a business figure out what the cost of product is during the manufacturing process. These tools are beneficial for a company to figure out how much profit can be made. These tools take the cost of manufacturing the unit and subtract it from the sale price of
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