Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 5, Problem 5.7BYP
Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an additional $4,500 above the cost of a traditional vehicle. The hybrid will get 40 miles per gallon of gas, and the traditional car will get 30 miles per gallon. Also, assume that the cost of gas is $3.60 per gallon.
Instructions
Using the facts above, answer the following questions.
(a) What is the variable gasoline cost of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car?
(b) Using the information in part (a), if “miles” is your unit of measure, what is the “contribution margin” of the hybrid vehicle relative to the traditional vehicle? That is, express the variable cost savings on a per-mile basis.
(c) How many miles would you have to drive in order to break even on your investment in the hybrid car?
(d) What other factors might you want to consider?
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Chapter 5 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 5 - (a) What is cost behavior analysis? (b) Why is...Ch. 5 - (a) Scott Winter asks your help in understanding...Ch. 5 - Contrast the effects of changes in the activity...Ch. 5 - J. P. Alexander claims that the relevant range...Ch. 5 - The relevant range is indispensable in cost...Ch. 5 - Prob. 6QCh. 5 - How should mixed costs be classified in CVP...Ch. 5 - At the high and low levels of activity during the...Ch. 5 - "Cost-volume-profit (CVP) analysis is based...Ch. 5 - Faye Dunn defines contribution margin as the...
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Define the term margin of safety. If Revere...Ch. 5 - Prob. 16QCh. 5 - Prob. 17QCh. 5 - Monthly production costs in Dilts Company for two...Ch. 5 - Prob. 5.2BECh. 5 - For Wesland Company, a mixed cost is 15,000 plus...Ch. 5 - Bruno Company accumulates the following data...Ch. 5 - Markowis Corp. has collected the following data...Ch. 5 - Determine the missing amounts.Ch. 5 - Russell Inc. had sales of 2,20O,0O0 for the first...Ch. 5 - Rice Company has a unit selling price of 520,...Ch. 5 - Presto Corp. had total variable costs of 180,000....Ch. 5 - For Flynn Company, variable costs are 70% of...Ch. 5 - Prob. 5.11BECh. 5 - Prob. 5.12BECh. 5 - Amanda Company reports the following total costs...Ch. 5 - Westerville Company accumulates the following data...Ch. 5 - Prob. 5.3DICh. 5 - Snow Cap Company has a unit selling price of 250,...Ch. 5 - Presto Company makes radios that sell for 30 each....Ch. 5 - Bonita Company manufactures a single product....Ch. 5 - Shingle Enterprises is considering manufacturing a...Ch. 5 - The controller of Norton Industries has collected...Ch. 5 - Family Furniture Corporation incurred the...Ch. 5 - The controller of Hall industries has collected...Ch. 5 - PCB Corporation manufactures a single product....Ch. 5 - Marty Moser wants Moser Company to use CVP...Ch. 5 - All That Blooms provides environmentally friendly...Ch. 5 - The Palmer Acres Inn is trying to determine its...Ch. 5 - In the month of March, Style Salon services 560...Ch. 5 - Spencer Kars provides shuttle service between four...Ch. 5 - In 2016. Manhoff Company had a break-even point of...Ch. 5 - Billings Company has the following information...Ch. 5 - Naylor Company had 210,000 of net income in 2016...Ch. 5 - Yams Company reports the following operating...Ch. 5 - Glacial Company estimates that variable costs will...Ch. 5 - Felde Bucket Co., a manufacturer of rain barrels,...Ch. 5 - Vin Diesel owns the Fredonia Barber Shop. He...Ch. 5 - Jorge Company bottles and distributes B-Lite, a...Ch. 5 - Tanek Corp.'s sales slumped badly in 2017. For the...Ch. 5 - Mary Willis is the advertising manager for Bargain...Ch. 5 - Prob. 5.5APCh. 5 - Kaiser Industries carries no inventories. Its...Ch. 5 - Bill Johnson, sales manager, and Diane Buswell,...Ch. 5 - Creative Ideas Company has decided to introduce a...Ch. 5 - The condensed income statement for the Peri and...Ch. 5 - Prob. 5.3BYPCh. 5 - Prob. 5.4BYPCh. 5 - Your roommate asks for your help on the following...Ch. 5 - Prob. 5.6BYPCh. 5 - Cost-volume-profit analysis can also be used in...
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