Division to break even? Answer Q1: Breakeven Fixed costs $260‚000.00 = ---------------------------------- = ---------------------- = 13‚326 units number of units Unit contribution margin $19.51 UCM (Unit Contribution margin) = USP (Unit Selling Price) UVC (Unit Variable Costs) = = $48.00 - $28.49 = $19.51 USP = Sales / Units sold = $864‚000.00/18‚000 = $48.00 UVC = Total variable costs / Units produced = $512‚800.00/18‚000 =$28.49 Conclusion:
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The monthly operating costs summary for the company when it operates at full capacity is as given below: Table ‘1’ Monthly costs at 150‚000 volume Manufacturing costs Direct material - variable Direct labor – variable Direct labor – fixed Manufacturing overhead – variable Manufacturing overhead - fixed $6‚000 1‚500 3‚000 1‚500 3‚375 Total manufacturing costs $15‚375 Non-manufacturing costs Sales – variable Sales – fixed Corporate - fixed $1‚500 1‚875 3
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QUESTIONS ON BREAK-EVEN ANALYSIS 1. A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives‚ A and B‚ have been identified and the associated costs and revenues have been estimated. Annual fixed costs would be $40‚000 for A and $30‚000 for B; variable costs per unit would be $10 for A and $12 for B; and revenue per unit would be $15 for A and $16 for B. a) Determine each alternative’s break-even point in units. b) At what volume of output would the
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to use) Cost (Price) Standards: the cost (purchase price) of the units should be (how much we expect to pay for a particular item) Management by Exception: a system of management in which standards are set for a various operating activities. The actual results are compared to these standards (comparing what happened with what should have happened). The differences are called exceptions and are brought up to the management. Variance Analysis Cycle: preparation of standard cost performance
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| | |Such analysis allows the firm to determine at what level of operations it will break even (earn zero profit) | | |and to explore the relationship between volume‚ costs‚ and profits. | | | | |5-2. |What factors would cause a difference
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Chapter 12 Determining the financing mix I. Risk * Variability associated with expected revenue or income streams. Such variability may arise due to: * Choice of business line (business risk) * Choice of an operating cost structure (operating risk) * Choice of Capital structure (financial risk) a) Business Risk * Variation in the firm’s expected earnings attributable to the industry in which the firm operates. There are four determinants of business risk:
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Preparatory Investigation: The Water Resource‚ Land and and Buildings‚ Market and Prices The Entrepeneurs A young couple in Iceland‚ Johann and Rosa‚ have taken over Johann’s parents’ farm. Traditional husbandry of cattle and sheep for production of meat and dairy products has gone through a rough time so they have been looking for new opportunities in their farming. Johann believes that arctic charr might suit them well. Before making up their mind they inspect their water resources‚ the features
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True False 2. Financial accounting information is prepared according to generally accepted accounting principles. True False 3. Managerial accounting information includes such items as budgets‚ performance evaluations‚ and cost reports. True False 4. Financial accounting information is reported for the company as a whole. True False 5. Investors‚ creditors and regulators are the primary users of managerial accounting information. True False
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160 Average variable cost per passenger $ 70 Fixed operating cost per month $3‚150‚000 Formula : Revenue = Units Sold * Unit price Contribution Margin = Revenue – All Variable Cost Contribution Margin Ratio = Contribution Margin/Selling Price Break Even Points in Units = (Total Fixed Costs + Target Profit )/Contribution Margin Break Even Points in Sales = (Total Fixed Costs + Target Profit )/Contribution
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00 7. Indirect costs @ 25% of $3‚675.00 $ 906.00 Subtotal $4‚529.00 8. Profit margin @ 5% of $4‚594.00 $ 227.00 Total $4‚756.00 Fixed Cost Conference room rental $175.00 Audiovisual equipment rental $75.00 4 Presenters @ $500.00 $2‚000 Indirect Cost @25% of $3‚675 $906.00 Profit Margin @5% of $4‚594 $227.00 Total Fixed Cost $3‚383.00 Variable Cost 45 Workbooks @ $15.00 $675.00 45 Lunches @ $12.00 $540.00 45 Coffees @ $3.50 $157.50 Total Variable Cost $1372.50 My Break-Even
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