Cost Accounting
Cost Accounting
15th Edition
ISBN: 9780133428834
Author: Horngren
Publisher: PEARSON
Question
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Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Blurred answer

Chapter 3 Solutions

Cost Accounting

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