g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of Safety: (i) Increase in sales volume (ii) Increase in total fixed costs (iii) Increase in selling price per unit (iv) Decrease in variable costs per unit
Q: Briefly explain the impact of each of the following scenarios on the contribution margin per unit…
A: Formula: Contribution margin per unit = Selling price per unit – Variable cost per unit.…
Q: Which of the following statements about margin of safety is false? O a. If only the fixed costs…
A: This option is False A. If only the fixed cost decreases but the number of units sold and unit…
Q: The margin of safety is the excess of: O Break-even sales over expected sales. O Expected sales over…
A: Introduction:- Break-even point point means, where no profit or loss At Break-even point point,…
Q: Margin of safety is computed as Select one: O a. Contribution margin - Fixed costs O b. Breakeven…
A: Margin Of Safety is the difference between Break Even Sales and Actual Sales
Q: a. How can the mathematical equation for break-even sales show both sales units and sales dollars?…
A:
Q: A company observed a decrease in the cost per unit All other things being equal, which of the…
A: SOLUTION- 1-You can reduce the unit cost of products by lowering your overhead cost per item. 2- By…
Q: Prepare an analysis of the sales quantity and unit price factors did the price decrease generate…
A: Sales quantity factor = (Actual Quantity - planned Quantity) * Planned Sales Price Sales quantity…
Q: Which of the following statements about margin of safety is false? O a. If the variable cost per…
A: If Fixed cost decreases remaining constant Break even sales automatically Break even sales reduces…
Q: Which of the following statements about margin of safety is false? O a. If only the fixed costs…
A: The Margin of Safety is the difference between the Budgeted Revenues and Breakeven Revenues.…
Q: Calculate: a) The break-even level of production and sales b) The margin of safety
A: Given in the question: Per Desk Amount Direct Materials €3.00 Direct Labour…
Q: What is the effect of an increase in variable costs as a percentage of sales onthe contribution…
A: Variable cost refers to the cost which varies according to the volume of produced units. Increase in…
Q: g) Briefly explain the impact of each of the following scenarios on the contribution margin per unit…
A: Contribution margin per unit is the sales revenue over and above variable costs in the business.…
Q: Which of the following statements represents Margin of Safety (units)? O a. Expected sales (units)…
A: Solution: The margin of safety represent sales level that generates profits. Therefore margin of…
Q: On the cost-volume-profit graph, which of the following would result into an increase in the…
A: Answer
Q: If both the fixed costs associated with a product and the variable costs (as apercentage of sales…
A: Cost: It can be defined as the total amount that is spent by a business in manufacturing a product.
Q: Which of the following statements about margin of safety is false? O a. If the variable cost per…
A: Margin of safety is calculated as excess of current sales revenue over break even sales.
Q: 4. When the contribution margin per unit increases assuming all other factors remain constant. The…
A: The break even sales are calculated as fixed cost divided by contribution margin ratio.
Q: Which of the following occurs if a company experiences a decrease in its fixed costs? Select one: O…
A: Contribution margin = Selling price - variable cost Break even point = Fixed cost / Contribution…
Q: The break-even point is that level of activity where a. total contribution margin equals the sum of…
A: At break-even point, there is no profit or no loss.
Q: Help question 28
A: Operating leverage: It is a financial ratio that measures a company’s operating income to its sales…
Q: Briefly explain the impact of each of the following scenarios on the break-even point and the margin…
A: The break even sales units are the sales where business earns no profit no loss during the period.
Q: At the breakeven point Select one: a. Fixed costs will be equal to variable costs b. Sales will be…
A: Sales revenue: It is the revenue earned by a business on selling the goods or providing services to…
Q: 22) Which of the following expressions can be used to calculate break-even sales revenue with the…
A: Break-even analysis is a technique used widely by production management. It helps to determine the…
Q: decrease in variable cost
A: Break even point is the level of sales at which an entity begins to generate profit. Break even…
Q: If sales volume decreases and all other factors remain constant, then the Multiple Choice margin…
A: Margin of safety = Sales - Break-even sales Break-even point = Fixed cost / Contribution margin…
Q: ?Which of the following statements about margin of safety is false .Margin of safety measures the…
A: The MOS is the difference between the budgeted sales or actual sales and the break-even sales. It…
Q: 1. Briefly explain the impact of each of the following scenarios on the break-even point and the…
A: 1. BREAK EVEN POINT : = FIXED COST / CONTRIBUTION MARGIN PER UNIT 2. MARGIN OF SAFETY : =…
Q: The break-even point is that level of activity where: Select one: O a. profit equals to zero. O b.…
A: Break-Even Point: It is the point of sales at which entity neither earns a profit nor suffers a…
Q: On the cost-volume-profit graph, which of the following would result into an increase in the…
A: Break even point in units = Fixed costs / (Selling price per unit - Variable cost per unit)
Q: Which of the following occurs if a company experiences a decrease in its fixed costs? Select one: O…
A: Break even point: It is calculated by dividing the fixed cost by the contribution margin ratio.
Q: On the cost-volume-profit graph, which of the following would result into a decrease in the…
A: Break even point is total fixed cost divided by contribution margin per unit. So break-even point…
Q: g) Briefly explain the impact of each of the following scenarios on the break-even point and the…
A: Margin of safety: The excess of actual sales over the break-even sales is known as margin of safety.…
Q: Which of the following statements about margin of safety is false? If the variable cost per unit…
A: Margin of safety can be referred to as the difference between the break even sales and the expected…
Q: On the cost-volume-profit graph, which of the following would result into a decrease in the…
A: CVP analysis: This analysis helps to evaluate how the changes made in cost and volume do affect the…
Q: 3. Each of the following would affect the break-even point, except a change in the a. variable costs…
A: A Break-even point is a spot where the aggregate cost and income of a business will become equal.…
Q: The use of fixed costs to extract higher percentage changes in profits as sales activity changes…
A: SOLUTION- DEGREE OF OPERATING LEVERAGE CALCULATES THE PROPORTIONAL CHANGE IN OPERATING INCOME THAT…
Q: Which of the following is true of the contribution margin ratio? a.If the contribution margin…
A: The contribution margin indicates the excess of revenue over its variable cost. It also indicates…
Q: How do you calculate Break-even Point? Select one: a. Fixed cost/ Contribution per unit b.…
A: Break-even point: The break-even point refers to a point where the total cost is equal to the total…
Q: On the cost-volume-profit graph, which of the following would result into an increase in the…
A: Break even point in units = Fixed costs / (Selling price per unit - Variable cost per unit
Q: On the cost-volume-profit graph, which of the following would result into an increase in the…
A: Break Even Point is a point where unit sold gives no profit or loss to the firm. Beyond Break Even…
Q: The break-even point in a given situation would be decreased by an increase in a. the CM ratio. b.…
A: CVP analysis is considered a decision-making tool that helps management to make strategies and take…
Q: Which of the following occurs if a company experiences a decrease in its fixed costs? Select one: a.…
A: Break-even point: In the accounting term break-even point is a condition where the income or profit…
Q: On the costvolume - profit graph which of the following would result into a decrease in the…
A: Answer
Q: On the cost-volume-profit graph, which of the following would result into an increase in the…
A: The Break-even point is the point where all the sales generated by the company are equal to the cost…
Q: The break-even point can be calculated with the following formula: Total fixed expenses / (Variable…
A: Break-even point = Total fixed expenses / (Selling price per unit - Variable cost per unit)
Q: The margin of safety can be defined as the excess of budgeted sales over: break-even sales. net…
A: Cost-volume profit analysis: It can be defined as a cost accounting method that shows the impact of…
Q: Briefly explain the impact of each of the following scenarios on the contribution margin per unit…
A: Contribution Margin per unit refers to the excess value over the variable expenses per unit when…
- g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of
Safety:
(i) Increase in sales volume
(ii) Increase in total fixed costs
(iii) Increase in selling price per unit
(iv) Decrease in variable costs per unit
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- Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,000 more units per year. Currently, the selling price per unit is $25 and the cost per unit is $7.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?Variety Artisans has a bottleneck in their production that occurs within the engraving department. Arjun Naipul, the COO, is considering hiring an extra worker, whose salary will be $45,000 per year, to solve the problem. With this extra worker, the company could produce and sell 3,500 more units per year. Currently, the selling price per unit is $18 and the cost per unit is $5.85. Using the information provided, calculate the annual financial impact of hiring the extra worker.
- The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express the companys maintenance costs as an equation where x represents the gallons of paint produced. Then estimate the fixed and variable costs. Predict the maintenance costs i190,000 gallons of paint are produced. Predict the maintenance costs if 81,000 gallons of paint are produced. Using Excel, create a scatter graph of the cost data and explain the relationship between gallons of paint produced and equipment maintenance expenses.Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farm assuming it purchases the new equipment. Assume sales level remains unchanged.
- Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?Regal Executive, Inc., produces executive motor coaches and currently manufactures the cent awnings that accompany them at these costs: The company received an offer from Saied Tents to produce the awnings for $3,200 per unit and supply 1,000 awnings for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the awning production can be used by a different production group that will lease it for $60,000 per year. Should the company make or buy the awnings?
- Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales24,000 units Selling expenses are expected to be 5% of sales, and net income is to amount to 2.00 per unit. Required: 1. Calculate the selling price per unit. (Hint: Let X equal the selling price and express selling expense as a percentage of X.) 2. Prepare an absorption costing income statement for the year ended December 31, 2016. 3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory overhead are all fixed but other costs are fully variable.Self-Construction Olson Machine Company manufactures small and large milling machines. Selling prices of these machines range from 35,000 to 200,000. During the 5-month period from August 1, 2019, through December 31, 2019, Olson manufactured a milling machine for its own use. This machine was built as part of the regular production activities. The project required a large amount of time front planning and supervisory personnel, as well as that of some of the companys officers, because it was a more sophisticated type of machine than the regular production models. Throughout the 5-month period, Olson charged all costs directly associated with the construction of the machine to a special account entitled Asset Construction Account. An analysis of the charges to this account as of December 31, 2019, follows: Olson allocates factory overhead to normal production as a percent of direct labor dollars as follows: Olson uses a flat rate of 40% of direct labor dollars to allocate general and administrative overhead. During the machine testing period, a cutter head malfunctioned and did extensive damage to the machine table and one cutter housing. This damage was not anticipated and was the result of an error in the assembly operation. Although no additional raw materials were needed to make the machine operational after the accident, the following labor for rework was required: Olson has included all these labor charges in the asset construction account. In addition, it included in the account the repairs and maintenance charges of 1,340 that it incurred as a result of the malfunction. Required: 1. Compute, consistent with GAAP and common practice, the amount that Olson should capitalize for the milling machine as of December 31, 2019, when it declares the machine operational. 2. Next Level Identify the costs you included in Requirement 1 for which there are acceptable alternative procedures. Describe the alternative procedure(s) in each case.