A because sales line has higher slope for B so it has more sales amount. b) Fixed Costs / Unit Contribution Margin = Breakeven Point in Units Hence‚ Provider B has higher contribution margin which equals to fixed costs divided by breakeven point in units. So for provider B‚ fixed cost is higher than A; and also breakeven point has less units than A. Consequently‚ Provider B has greater contribution margin. c) Break-even point determines the situation in which company makes neither loss nor profit
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Pre-Text *All numbers are based in Jamaican currency. * All numbers are rounded to the nearest dollar. 1.What managerial issues should David consider before starting the CIC? Before starting the CIC David should consider the following managerial issues: 1. He has minimal training in business ownership. He has the background of a computer programmer‚ and is getting his MBA but he is still in the process of learning and doesn’t have the knowledge to start an internet café. 2. David
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Cost-Volume-Profit Relationships Solutions to Questions 6-1 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can be used in a variety of ways. For example‚ the change in total contribution margin from a given change in total sales revenue can be estimated by multiplying the change in total sales revenue by the CM ratio. If fixed costs do not change‚ then a dollar increase in contribution margin will result in a dollar increase in net operating income
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CHAPTER 8 Cost-Volume-Profit Analysis ANSWERS TO REVIEW QUESTIONS 8-1 a. In the contribution-margin approach‚ the break-even point in units is calculated using the following formula: Break-even point = fixed expenses unit contribution margin b. In the equation approach‚ the following profit equation is used: sales volume ⎞ ⎛ unit variable sales volume ⎞ ⎛ unit fixed ⎜ ⎟ −⎜ ⎟ − ⎜ sales price × ⎟ ⎜ expense × ⎟ expenses = 0 in units ⎠ ⎝ in units ⎠ ⎝ This equation is solved for the sales volume in
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$50 ‚ the Unit Contribution will be fixed to $ 35 (50-15) for all other segments‚ and for student segment‚ it will be $15.( (60% of 50) -15). Case 2 – only Commercial software – The optimal price should be taken as 225 as that covers all other categories except the students. Case 3 – only Industrial software – the price should be 600 as the incremental contribution below this segment is less than the segment development costs. Version | Optimal Price | Total Contribution | Net Total Contribution
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QUESTION a). Name five assumptions that underline the use of break – even analysis. It is essential that anyone preparing or interpreting CVP information is aware of the underlying assumptions on which the information has been prepared. If these assumptions are not recognized‚ serious errors may result and incorrect conclusions may be drawn from the analysis.(Drury‚ 2004). Breakeven analysis (cost-volume-profit analysis) is an approach to profit planning that requires derivation of various relationships
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AC552 Midterm Study Guide Studying the following items will assist you in the preparation of your Midterm. You are strongly urged to examine these areas….have fun! * Relevant range * Break-even point * Contribution margin * Process costing * Job costing * Calculate equivalent units * ABC systems * Direct‚ indirect‚ variable‚ fixed‚ prime‚ and conversion costs * CVP analysis Good luck! This is the REAL exam‚ so choose your time to enter carefully. The
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example of how all of these contribute to the CVP analysis will help in seeing how the process works and how it will be useful to a company. In the first example we will see how an increase in unit selling prices will affect the contribution margin. The contribution margin is the amount of revenue remaining after deducting variable costs. Say that XYZ auto parts store sells a particular part for 100 dollars. The variable costs would be say 50 dollars. Both of these are per unit. Take the variable
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per unit × 410‚000 units) $27‚880‚000 Variable costs ($60 per unit × 410‚000 units) 24‚600‚000 Contribution margin $ 3‚280‚000 1b. Contribution margin (from above) $3‚280‚000 Fixed costs 1‚640‚000 Operating income $1‚640‚000 2a. Sales (from above) $27‚880‚000 Variable costs ($54 per unit × 410‚000 units) 22‚140‚000 Contribution margin $ 5‚740‚000 2b. Contribution margin $5‚740‚000 Fixed costs 5‚330‚000 Operating income $ 410‚000 3 Operating income is
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|6% |/ $10‚711 = | | | | |-9% | |Contribution Margin Format |Sales $8‚583 |Sales $8‚102 |Sales $10‚711 | |(in thousands of dollars) |-VC $4‚808
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