leverage- a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs. 1. A business that makes few sales‚ with each sale providing a very high gross margin‚ is said to be highly leveraged. A business that makes many sales‚ with each sale contributing a very slight margin‚ is said to be less leveraged. As the volume of sales in a business increases‚ each new sale contributes less to fixed costs and more to profitability. 2. A business that has a higher proportion
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capacity for the planning period. _F___6. This cost is the combined amount of all the other costs. II. Contribution margin and breakeven Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $630‚000. Use this information to compute the company’s (a). Contribution margin‚ (b). Contribution margin ratio‚(c). Break-even point in units‚(d). Break-even point in dollars of sales. (a). CM/unit = P/unit
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12 PRICING DECISIONS AND COST MANAGEMENT 12-1 The three major influences on pricing decisions are 1. Customers 2. Competitors 3. Costs 12-2 Not necessarily. For a one-time-only special order‚ the relevant costs are only those costs that will change as a result of accepting the order. In this case‚ full product costs will rarely be relevant. It is more likely that full product costs will be relevant costs for long-run pricing decisions. 12-3 Two examples of pricing decisions with a short-run
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Course Subject: Accounting for Decision-making Course Code : GSM5301 Group : 8 Case Study : Prestige Telephone Company Background of Case Study In April 1997‚ president of Prestige Telephone Company (PTC)‚ Daniel Rowe‚ was making arrangements to meet with its computer data service subsidiary Prestige Data Services’ (henceforth PDS) manager Susan Bradley. This subsidiary performs data processing for the telephone company and sells computer services to other companies. In 1994‚ Rowe suggested
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Current Profit: $ 2500 New Price per additional unit: 0 New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6 New Sales unit @40% additional sales= 5000*40%= 2000 Additional profit @40% additional Sales = Additional Sales* New Contribution Margin =2000*6 =$12000 New Sales unit @20% additional sales= 5000*20%= 1000 Additional profit @20% additional Sales = Additional Sales* New Contribution Margin =1000*6 =$6000 Steady: Sales: 5000 Price per unit: $10
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1. Haar Inc. is a merchandising company. Last month the company’s cost of goods sold was $61‚000. The company’s beginning merchandise inventory was $11‚000 and its ending merchandise inventory was $21‚000. What was the total amount of the company’s merchandise purchases for the month? A. $61‚000 B. $51‚000 C. $71‚000 D. $93‚000 Purchases = Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory = $61‚000 + $21‚000 - $11‚000 = $71‚000 2. Gabruk Inc. is a merchandising
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Submit Homew ork for Ch tad9000 gfmcppeopigbdej Advanced Manag Question 1: Score 0/4 Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1‚200 and the variable cost per cup of coffee served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity
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capacity and determine if taking Hi-Valu’s proposed contract would be the optimal solution. Quantitative Analysis: * By accepting the offer‚ BBC will increase their contribution margin by $442‚290 (Exhibit 1). Although there is a loss of contribution margin equal to 3000 units of BBC’s products‚ the additional contribution margin from Hi-Valu’s proposition more than offsets the loss. * Upon accepting the offer‚ BBC will need $735‚530 per year to invest in additional assets (Exhibit 2). BBC
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and consistent in the long run. This is due to the lack of knowledge in finance and costing which is it contributed to the business failure. There were disadvantages associated with a petrol station that is the fuel business had a very low profit margin. It was important that operators manage their cash collection very well. Realising the importance of management accounting concepts‚ Mr Aiman believed that the dealers and their relevant staff should have the knowledge in cost accounting. In order
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Business plan Raymond ’s Sports Cafe All the comments in the following business plan are based on the waiter Raymond Reed’s start of a sports cafe in the better part of a big city. Raymond ’s Sports Cafe is a fictitious company that is exclusively designed to serve as an example of how a business can be disposed. See template for this business plan on www.dynamicbusinessplan.com Contents BACKGROUND INFORMATION ..............................................................................
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