Chapter 2 Questions 2-1. I agree with this statement. I would also like to add that cost behavior is also identifying the key resources that are performed‚ resources used in performing these activities‚ costs of the resources‚ and what the cost is driven from. 2-2. Two rules of thumb when analyzing cost behavior are to manage what the company manufactures‚ sells‚ and to give advice as to where costs can be reduced. 2-3. Three examples of a variable cost are a 12% increase in the production of
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nights Contribution margin from question 1 or Average Revenue – Variable Cost per Unit = = $20.94 - $2.54 = $18.4 Loss: 80 – 72 = 8 rooms x 34 weekend nights x $18.4 = $5‚005 Profit: 72 rooms x 34 weekend nights x $5 increase in rates = $12‚240 Difference = $12‚240 - $5‚005 = $7‚235 (number if positive; therefore‚ we have a profit and we should add it to profit before taxes) Therefore‚ revised profit before taxed would be equal to $22‚390 + $7‚235 = $29‚625 Question 3. Contribution Margin
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Analysis: BYP6-2 ACC/349 Managerial Analysis: BYP6-2 (a) Compute and interpret the contribution margin ratio under each approach. Current approach: 800‚000 / 2‚000‚000 = 0.4 Automated approach: 1‚600‚000 / 2‚000‚000 = 0.8 (b) Compute the break-even point in sales dollars under each approach. Discuss the implications of your findings. Breakeven Point – Fixed Expenses / Contribution Margin Ratio Current Approach: 200‚000 / .4 = $500‚000 Automated Approach: 600‚000
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Executive Summary Precision Worldwide‚Inc (PWI) is a manufacturing company of industrial machines and equipment for almost 90 years. One of their plants located in Frankfurt‚ Germany‚ produces a particular model at a price ranging from $ 18‚900 to $ 28‚900. Moreover‚ the plant has another department that manufactures steel retaining rings. These rings are considered as an integrate parts of the machines they are actually manufactured. This department can sell their rings either internally or externally
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costs and volume changes. As the owner of a Snap Fitness franchise‚ decisions about selling prices‚ product mix‚ and maximizing the use of the fitness center depends on CVP. A CVP analysis classifies cost as variable and fixed‚ and calculates a contribution margin. Relevant information identified in the analysis is the total monthly fixed costs of Snap Fitness‚ which are $6‚000. Monthly fixed operating costs are $4‚000 and monthly lease equipment costs are $2‚000. The fitness center charges $26
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Marginal costing statements are easily understandable for profit planning because they follow managements decision making process more closely than do full cost statements. * Marginal costing statements allow a more objective appraisal of income contribution of different products. * Calculation of product cost is more convenient‚ accurate and reliable by using marginal costing statements‚ because the basis to allocate fixed costs which involve estimates and personal judgments are eliminated.
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P 20 Q 2.000 R 40.000 VC 16.000 VCu = 8 FC 20.000 Q1) P/P = +20% P = +20%*20 = +4 The formula to compute Iso-Contribution change in sales volume is the following: Q = -25%*2.000 = -500 The maximum sales loss that the company can incur without hurting profits is of 500 units or -25%. Actual Change in Sales Change in Contribution = Change in Profit (%) (Units) ($) ($) 0‚0% 0 8000 8.000 -10‚0% -200 4800 4.800 -20‚0% -400 1600 1.600 -25
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CVP and Break-Even Analysis Paper Learning Team A ACC/561 Instructor 2013 CVP and Break-Even Analysis Paper When starting a business or buying a franchise it is critical for one to determine the star-up cost associated with the business. However‚ the most import item one must look at is the breakeven point. The breakeven point is important because it helps one plan out its activities to gives business owners an idea of the sales needed to cover its cost before one can make a profit
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Case: CRU Computer Rental CRU Computer Rentals is a national computer rental company that has seen rapid growth since its inception in 1990. The company purchases computers‚ printers‚ monitors‚ and other peripherals and rents them out both for the long term and short term. CRU’s sales have begun to increase from the previous quarter‚ but profitability continued to decline. Although revenue was increasing‚ the decline in profit warranted further investigation into the root problem causing this occurrence
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Colin Drury‚ Management and Cost Accounting – Boston Creamery Boston Creamery Professor John Shank‚ The Amos Tuck School of Business Administration Dartmouth College This case is reprinted from Cases in Cost Management‚ Shank‚ J. K. 1996‚ South Western Publishing Company. The case was prepared by Professor John Shank from an earlier version he wrote at Harvard Business School with the assistance of William J. Rauwerdink‚ Research Assistant. This case deals with the design and use of formal
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