Assume that the operating results for last year were: | |Sales |$300,000 | | |Less variable expenses | 90,000 | | |Contribution margin |210,000 | | |Less fixed expenses | 135,000 | | |Net operating income |$ 75,000 | a. Compute the degree of operating leverage
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Salem Telephone Company Case No. 9-104-086 Group #4 John Pipkin Resean Crawley Chan Srinivasa Brian Hamilton Question 1 The fixed cost associated with Salem Data Services are: Item Expenses Space cost: Rent Custodial services Equipment costs Computer leases Maintenance Depreciation: Computer equipment Office equipment and fixtures Wages and salaries Operations: salaried staff Systems development and maintenance Administration Sales Sales promotion Corporate services Total January February March
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(7896/9442) x 28.7 = $24 3. Create a contribution margin income statement for Salem Data Services. Assume that intracompany usage is 205 hours. Assume commercial usage is at the March level. To find Sales Revenue: Intracompany: $400/hour x 205 hours= $82,000 Commercial: $800/hour x 138 hours= $110,400 $82,000 + $110,400= $192,400 To find Variable Cost: Variable Cost = $28.7 (138 + 205) = $9844 To find Contribution Margin: Contribution Margin = Sales Revenue – Variable Cost $192,400
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Salem Telephone Case 1) In my opinion the expenses that are variable with respect to revenue hours at Salem Data Services are Power, Hourly personnel, and Sales promotion. I believe these expenses are variable because they change with revenue. Corporate services is a mixed cost and there is not enough information to ascertain the portion that is variable. The fixed expenses with respect to revenue include, Space costs, Equipment costs, depreciation expense, Salaried staff, system development
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CVP Analysis and Presentation ACC/561 2012 Cost Volume Profit and Break-Even Analysis Break-Even Analysis-Volume-Analysis is a systematic method of examining the relationship between changes in volume (that is output) and changes in Sales Revenue, Express and Net Profit. As a model of these relationships, Break-Even Analysis simplifies the real-world conditions which a firm will face. The objective of Break-Even Analysis is to establish what will happen to the
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Costs=Salaries+Advertising+Administrative Expenses+Rent+Depreciation+Miscellaneous expenses Breakeven=Fixed Costs/Contribution Margin 2003-3230000/377.03=8,566.96 units 2004-3333000/357.68=9,318.39 units 2006-4921000/352.52=13,959.49 units Breakeven$=Breakeven Units*Unit Price 2003-8566.96*845=$7,239,079.12 2004-9318.39*812=$7,566,532.68 2006-13959.49*819=$11,432,822.31 Margin of Safety=Sales-Breakeven Sales 2003=8583000-7239079.12=1343920.88=15.66% 2004=8102000-7566532.68=535467.32=6.61%
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Aunt Connie's Cookies LaKesia Johnson ACC\561 March 29, 2011 Tony Guice Aunt Connie's Cookies Aunt Connie’s Cookies is the brain child of Connie Rocha and her grandniece Maria Villianueva. This family endeavor to off in 1986 when Connie would provide her homemade cookies to a fundraiser. She would provide them 600 cookies for a small fee of $55 (University of Phoenix, 2002) . The products needed to complete this order would come to a grand total of $35. This would include items such as sugar
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Lecture 5: Cost-Volume-Profit Analysis In this module, we are going to discuss a simple concept yet a powerful financial planning and decision-making tool for managers. This concept is called CVP analysis or cost volume profit relationship. Profits are the difference between revenues and costs. Both revenue and cost depend on the volume of operations. So, in the short run whether you make a profit or a loss depends upon the volume of sales you make. What is the unknown for a manager when
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business strategies. By gathering information on market demand and combining it with a marketing strategy that focuses on higher margin products, companies are able to continue and increase profits and survive. The Cost Volume Profit Analysis is the dominant and most cost efficient way of doing so. By understanding the economic concerns of cost structure, contribution margin, and break-even sensitivity, a business can create a decision model to enhance the company’s productivity. A brief outline
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CMR ENTERPRISES Q1: How profitable is Blackstone business? Solution: Commercial: * Contribution margin = 48% * Variable cost=52% * COGS = 34% * Other variable overhead = 18% Residential: * Contribution margin = 38% * Variable cost = 62% * COGS = 26% * Other variable overheads =36% In year 1: Monopoly enabled CMR to gain 25% of its residential revenues from Blackstone customers In year 2: Increased prices by 7% resulting in overall increase of 15-20%
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