evaluation to select the best direction for achieving the most profit at various sales or production levels under consideration. The information gleaned from a flexible budget expedites making choices and decisions to guide the company ventures while assisting in defining the fixed and variable costs of the overall operation. In brief, we will investigate the relationship between the flexible budget and those fixed and variable costs as well as explore the differences between static and flexible
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customer; Trust & Investment division involved in setting up Due bills accounts and in providing Data processing services. Finance division was responsible for Cost and profit allocation between divisions. There were two reasons led to conflict between Treasury division and Metro division: a) Inappropriate allocation of costs and profits between Treasury division and Metro division. It’s clear from Exhibit 4 below : Due bills T & I administrative expenses were completely charged to Metro division
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Contribution per CD unit b. Break-even volume in CD units and dollars c. Net profit if 1 million CDs are sold d. Necessary CD unit volume to achieve a $200,000 profit A. Retail price per unit -Variable cost per unit Retail = $ 9.00 Variable cost per unit = $1.25 CD package + Royalties 0.35 + 1.00= $2.60 9.00-2.60= $6.40 Contribution per CD unit= $6.40 B. Break-even point in units = total fixed costs / contribution per unit Total fixed cost = 275,000 advertising + 250,000 overhead
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Table of Contents 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Introduction ...................................................................................................................................... 2 Problem Statement ........................................................................................................................... 3 Process Flow...................................................................................................................................... 5 Competitive
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a market research firm. But even a sole practitioner can chart a basic curve that says that at X price, X' percentage will buy, at Y price, Y' will buy, and at Z price Z' will buy. • Cost - Calculate the fixed and variable costs associated with your product or service. How much is the "cost of goods", i.e., a cost associated with each item sold or service delivered, and how much is "fixed overhead", i.e., it doesn't change unless your company changes dramatically in size? Remember that your gross
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Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. 1. First I need to determine the profit. Profit = (Price – Variable Costs) * Unit of Output – Fixed Costs Profit = ($30 - $15) * 60,000 - 0 - $700,000 ($15) * 60,000 = $900,000 - $700,000 = $200,000 Profit = $200,000 2. Next I need to determine the variable costs associated. Variable costs = $15, however
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* Bill was using volume base costing, when he is doing calculation for O/H he didn't pay any attention to product base calculation. So he cannot know the effects of the product to cost. With his calculation it is not so easy to decide to go ahead to producing which products. * For the right break-even point calculation it is necessary to make a calculation product base break-even point. And Bill was thinking all the cost are remaining same, especially the variable costs. * At the same
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formed in the early 1980’s as a partnership with the aid of some European funding. It currently has a budgeted turnover of £2.75m with anticipated profit for the year of £0.40m. This first case study focuses on the concept of standard costing, variance analysis and the reconciliation of budget to actual profit through an analysis of the main cost variances. The scenario assumes that you work as an assistant in the SME business services unit of Dunn and Musgrave a firm of accountants and consultants
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CHAPTER 7: COST-VOLUME-PROFIT ANALYSIS QUESTIONS 7-1 The underlying relationship in cost-volume-profit analysis is that costs, revenues, and profits all change in a predictable way as the volume of activity changes. 7-2 It is more practical to find the breakeven point in sales dollars for companies having thousands of individual items. Finding the breakeven point for each item would be laborious and meaningless. 7-3 The contribution margin ratio is: price - variable costs
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Fixed costs are not related to the volume of services delivered. Semi-fixed costs are fixed at two or values within relevant ranges. 5.2 Total fixed costs and total variable costs. 5.3 a) The cost-volume profit analysis is applied to organization’s costs and revenue structure that analyzes the effect of volume changes on cost and profits.b) It’s useful because they evaluate causes of action regarding pricing and introduction of new services. 5.4 a) The differences between per-unit cost (variable
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