1.
Calculate gross profit at regular sales price and discounted sales price.
2.
Calculate the additional number of units needed to sell this year to make the same gross profit as last year.
3.
Identify the fixed costs and variable costs relative to the sales revenue.
4.
Discuss the impact on operating income if the sales are decreased. Explain whether a cost structure that is largely fixed in nature can increase the company financial risk.
5.
Identify whether the advertising cost is fixed or variable. Explain how the increase in advertising cost affects the company’s operating income, if the company has a small margin of safety. Explain what would be effect in case of decrease in advertising costs.
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Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
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