SRATC curve at output level below point Q* is determined by the fixed component of total cost. Then bigger/smaller fixed cost is then SRATC curve will be more/less steeper (“F/S” shapes). High fixed costs causes that business is much more vulnerable to any kind of external shock on the market. Variable labour cost also has influence on the steepness of the SRATC curve especially when a business benefits from IRL. IRL reduces variable cost as output increases and this makes the SRATC curve steeper where
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Company has only 3 products and lots of competitors with similar products. The manager thinks the product 103 should be dropped for its high cost which could not be cut down‚ and the product 102 has an increasing demand. Also‚ the managers want to make a price reduction. However‚ they find that the costs are too high to support the price reduction. Does the cost system of Superior Manufacturing Company work effectively? QUESTION - 1. Based on the 2004 statement of profit and loss data (Exhibits 1 and
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1) Brief Exercise BE18-1 Monthly production costs in Pesavento Company for two levels of production are as follows. Cost 3‚000 units 6‚000 units Indirect labor $10‚000 $20‚000 Supervisory salaries 5‚000 5‚000 Maintenance 4‚000 7‚000 Indicate which costs are variable‚ fixed‚ and mixed. Indirect labor Variable cost Supervisory salaries Fixed cost Maintenance Mixed cost 2) Brief Exercise BE18-7 Bruno Manufacturing
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accurately and reasonably budget the variable costs. NASA calculates standard variable cost per tonne of butyl by multiplying a standard utilization factor by a standard price established for each unit of input. Since feedstock prices varied with worldwide market conditions and represented the largest component of costs‚ it is impossible to establish standard input prices that remained valid for extended periods. Therefore‚ the company reset feedstock standard costs each month to a price that reflected market
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division ‘A’ has lower turnover of investment that its assets management is bad than Division ‘B’‚ it can be improved by increased sales or reducing investment. Division ‘B’ – Needs to improve profit margin by increasing sales and reduce variable cost and sales at same price or by reducing salesprice and increase the volume of sales so that its profit would improve. As it has good assets management shown by its turnoverof Division ‘B’ that is 3 times which is better than Division ‘A’. So it can
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Competition Bikes‚ Inc. breakeven point when evaluating the sales units and the sales dollars and also the influence direct materials and fixed costs have on the breakeven analysis performed. Costing Method The traditional costing method is a distribution of manufacturing overhead costs to the actual products manufactured. By using this method the factory’s indirect costs are assigned‚ on a scale of volume‚ to the items manufactured (Averkamp‚ 2013). This may include items such as the direct hours
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year‚ regardless of the number of haircuts. Rent and other fixed expenses are $1‚750 per month. Hair shampoo used on all clients is .40 per client. Assume that the only service performed is the giving of haircuts (including shampoo)‚ the unit price of which is $12. Andre has asked you to find the following information and explain our answers. 1. Find the contribution margin per haircut. Assume that the barbers’ compensation is a fixed cost. Show calculations to support your answer. Given the information
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Vineyard using cash flows‚ NPV‚ BEP and various other methods to view the potential for investment. This report will also highlight the prospects of the company and make recommendations that would improve Biddenden Vineyard. Q1. There are a variety of costs within the business‚ they all have a purpose. From looking at Income Statements and the Statement of Financial Position‚ you can analyse where and when bills‚ materials‚ maintenance and other expenses come in and out. Carefully classified payments
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company. 2. A direct cost is a cost that is: A. Identifiable as controllable. B. Traceable to the company as a whole. C. Does not change with the volume of activity.
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$30 per unit) Fixed costs Total variable costs (1‚000‚000 units @ $18.80 per unit) Operating Income (EBIT) Interest (10.75% x $12‚000‚000) Earnings before taxes Taxes (35%) Earnings after taxes Shares Earnings per share * Fixed costs include $2‚800‚000 in depreciation $ 30‚000‚000 5‚800‚000 18‚800‚000 5‚400‚000 1‚290‚000 4‚110‚000 1‚438‚500 2‚671‚500 2‚320‚000 1.15 $ $ $ 2) Although there is more shares‚ the Earnings after taxes are now higher due to the lower variable costs‚ which compensates
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