the increase in fixed costs and also the decrease in sales. The increase between 2004-2006 is due to the dramatic increase of fixed costs because of the bigger store and higher rent and the decrease in contribution margin that is caused by the greater increase in variable costs than sales. The margin of safety on the other hand gradually decreased. The decrease between 2003-04 and 2004-06 are 20% and 47% respectively. The reason for that is the huge increase in break-even point between 2004 and 2006
Premium Variable cost Costs Management accounting
Case 7-2 Five Star Tools This report provides an analysis and evaluation of constraints in the production process for the Model C210 and the Model D400 of the Five Star Tools product line. The significant growth the company has experienced in recent years has led to a strain on the firm’s production capacity. This report seeks to determine how to loosen constraints on production and identify the most profitable product line given current production limitations. Incremental analysis is used to
Premium Theory of Constraints Process management Eliyahu M. Goldratt
Introduction Grear Rafting Company‚ owned by Peggy Grear is a company that provides rafting services to rafters. Grear Rafting Company‚ henceforth referred to as Grear Rafting‚ has just gone through its first season in business on which it provided rafting services to 1‚048 rafters for seven (7) days. During these seven (7) days‚ Grear Rafting also provided meals to the rafters three times a day‚ it also provides the rafts used during the season. During its first season‚ however‚ Grear Rafting experienced
Premium Variable cost Contribution margin Costs
whether to introduce a new product or service line‚ to determine the appropriate sale price and the consequent market position for the firm’s product. Question 1) “Contribution” represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. To compute profit contribution that can be earned by carrying 1 ton of tapioca from Balik Papan to Singapore‚ dock to dock‚ and 1 ton of general merchandise goods from Singapore to Balik Papan only
Premium Variable cost Costs Contribution margin
Case Study 1: Answer 1: In the early 1980s‚ as Fuji launched an aggressive export drive‚ Kodak was attacked in the North American & European markets. Fuji was taking over the markets & made Kodak realize that it was time to be alert & more aggressive. This led to the decision of being more defensive & thus Kodak started considering Japanese market more seriously. Answer 2: I strongly believe that the charges were valid. By systematically denying Kodak’s access to Japanese distribution
Premium Government of Japan Multinational corporation Contribution margin
is the range of activity for which estimates of costs are likely to be accurate. 8. The contribution margin is equal to the selling price minus variable cost. The contribution margin ratio is the contribution margin per dollar of sales‚ i.e.‚ the contribution margin per unit divided by the sales price per unit. 9. It would not be appropriate to focus on weighted average contribution margin per unit if the units were dissimilar (e.g.‚ pencils and computers at an office supply warehouse)
Premium Variable cost Costs Contribution margin
sales (TS) =$864‚000 Total Units (TU) = 18‚000 Total variable costs (TVC) = $512‚800 Total Fixed costs (TFC) = $260‚000 Let the number of motors required to be sold to breakeven = Q Then Q = Total Fixed Costs (TFC) / Contribution Margin per unit (CMU) (Equation 1) CMU = Selling price per unit (SPU) – Variable cost per unit (VCU) (Equation 2) SPU = TS/TU = 864‚000/18‚000 = $48 (3) CMU = TVC/TU =
Premium Variable cost Costs Fixed cost
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
Premium Operating leverage Leverage Revenue
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
Premium Variable cost Contribution margin Costs
going to use a contribution income statement to emphasize the behavior of costs. We will then base our analysis on the contribution income statement for the past 3 years. Sales‚ variable expenses and contribution margin are expressed on a per unit basis as well as the contribution income statement. This income statement has been prepared for management’s use inside the company and would not ordinarily be made available to those outside the company. Slide 5 Contribution margin is the marginal
Premium Contribution margin Marketing Management accounting