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- Jakarta Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $80,000. Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,800,000. What is the margin of safety for jaka rta and Maldives? Compare the margin of safety in dollars between the two companies. Which is stronger? Compare the margin of safety in percentage between the two companies. Now, which one is stronger? Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why. Illustrate your findings in an Income Statement that is increased by 15%.a) Calculate the contribution margin per unit.b) Calculate the number of units Beauty Supplies Company must sell each year to break even.c) Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000.d) Managers may use Sensitivity analysis in their accounting system.i) What is sensitivity analysis? ii) How is Sensitivity analysis useful to managers?For a certain company, the cost function for producing x items is C(x)=40x+200, and the revenue function for selling x items in R(x)=−0.5(x−80)2+3,200. The maximum capacity of the company is 110 items. The profit function P(x) is the revenue function R(x) (how much it takes in) minus the cost function C(x) (how much it spends). In economic models, one typically assumes that a company wants to maximize its profit, or at least make a profit!Assuming that the company sells all that it produces, what is the profit function?P(x)= Preview Change entry mode . Hint: Profit = Revenue - Cost as we examined in Discussion 3. What is the domain of P(x)?Hint: Does calculating P(x) make sense when x=−10 or x=1,000? The company can choose to produce either 40 or 50 items. What is their profit for each case, and which level of production should they choose?Profit when producing 40 items = Number Profit when producing 50 items = Number Can you explain, from our model, why the company makes less profit…
- Suppose a ceiling fan manufacturer has the total cost function C(x) = 35x + 1200 and the total revenue function R(x) = 65x. (a) What is the equation of the profit function P(x) for this commodity? P(x) = (b) What is the profit on 20 units? P(20) = Interpret your result. The total costs are less than the revenue. The total costs are more than the revenue. The total costs are exactly the same as the revenue. (c) How many fans must be sold to avoid losing money? fansA company produces and sells a product. The company has found that the costto produce x units of the product is given by C(x) = 50x + 200 (in dollars),and the revenue from selling x units is given by R(x) = 100x - x? (in dollars).What is the number of units the company should produce and sell to maximize profitExplain margin of safety and why it is an important measurement for managers. Jakarta Company is a service firm with current service revenue of $400,000 and a 40% contribution margin. Its fixed costs are $80,000. Maldives Company has current sales of $6,610,000 and a 45% contribution margin. Its fixed costs are $1,800,000. A. What is the margin of safety for Jakarta and Maldives? B. Compare the margin of safety in dollars between the two companies. Which is stronger? C. Compare the margin of safety in percentage between the two companies. Now, which one is stronger?
- Classify the following type of cost with necessary reasons:1.A company had paid 15,50,000 to a marketing research company to find expected demand of the newly developed product of the company2.A company has invested 50,00,000 in a project. The company could have earned 6,00,000 by investing the amount in proper government securities.3.Accountant of a cloth factory paid 88,000 for water which has been used for washing the clothes.Gwen is the managerial accountant in charge of Company A, which sellswater bottles. She previously determined that the fixed costs of Company A consist ofproperty taxes, a lease, and executive salaries, which add up to P500,000. Thevariable cost associated with producing one water bottle is P80 per unit. The waterbottle is sold at a premium price of P500. a. Formulate the total cost function.b. Formulate the revenue function.c. Formulate the profit function.d. Determine the breakeven quantity and the breakeven sales.e. Use the graphical method to determine the breakeven point.A manufacturing firm is choosing between two models of equipment that would lessen labor costs. Machine A has a purchase price of $36,500 and $36,300 for Machine B. You have additional data for repair costs per machine:How much is the savings amount for your chosen alternative if the firm is earning 7% return on its capital
- A small company manufactures a certain item and sells it online. The company has a business model where the cost, C in dollars, to make x items is given by the equation C = 20/3 x + 50. The revenue R , in dollars , made by selling x items is given by the equation R = 10x. How many items must the company sell in order for the cost to equal their revenue?How I can resolve this problem. The management of a firm wants to introduce a new product. the product will sell for $4 a unit and can be produced by either of two scales of operation. in the first, total cost are. TC= $3,000 +$2.8Q In the second scale of operation, total cost are TC=$5,000+$2.04Q a. what is the break-even level of outpur for each scale of operation? b. what will be the firm;s profit for each scale of operation if sales reach 5,000 units? c. one-half of the fixed cost are noncash(depreciation) . all other expenses are for cash. if sale are 2,000 units, will cash receipts cover cash expenses for each scale of operation? d. the anticipaded levels of sales are the following: Year Unit Sales 1 4,000 2 5000 3 6,000 4 7,000 If management selects the scale of production which higher fixed cost, what can it expect…1.Use the table below to answer the following questions. Resource Prices A B C Labor $5 5 4 3 Capital 10 2 3 5 Entrepreneur 20 1 1 1 Assume that a firm finds its profits will be maximized when it produces 50 units of product W (i.e., “widgets”). Three techniques shown in the table above will produce exactly 50 widgets. Which technique is the least expensive way of producing a widget? Suppose the firm chooses the least-cost method of production. If widgets sell for $2 each, what is the total economic profit of the firm?