and the contribution margin. Question 1 : Should Lille Tissages change the price from FF20 to FF15? In order to answer to this question‚ the marketing director and the finance director need to consider the variable costs and the contribution margin for the two solution for the price of item 345 : FF20 and FF15 and analyze the advantage and disadvantage of each one. The question is what effect will have the change of price? Changing the price will affect the contribution margin (sale price
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the increase in fixed costs and also the decrease in sales. The increase between 2004-2006 is due to the dramatic increase of fixed costs because of the bigger store and higher rent and the decrease in contribution margin that is caused by the greater increase in variable costs than sales. The margin of safety on the other hand gradually decreased. The decrease between 2003-04 and 2004-06 are 20% and 47% respectively. The reason for that is the huge increase in break-even point between 2004 and 2006
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| NewCustomers | UpgradeCustomers | SPVCUCMU | $275 100 175 | $100 50 50 | The 60%/40% sales mix implies that‚ in each bundle‚ 3 units are sold to new customers and 2 units are sold to upgrade customers. Contribution margin of the bundle = 3 $175 + 2 $50 = $525 + $100 = $625 Breakeven point in bundles = = 24‚000 bundles Breakeven point in units is: Sales to new customers: | 24‚000 bundles 3 units per bundle | 72‚000 units | Sales to
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Introduction Grear Rafting Company‚ owned by Peggy Grear is a company that provides rafting services to rafters. Grear Rafting Company‚ henceforth referred to as Grear Rafting‚ has just gone through its first season in business on which it provided rafting services to 1‚048 rafters for seven (7) days. During these seven (7) days‚ Grear Rafting also provided meals to the rafters three times a day‚ it also provides the rafts used during the season. During its first season‚ however‚ Grear Rafting experienced
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sales (TS) =$864‚000 Total Units (TU) = 18‚000 Total variable costs (TVC) = $512‚800 Total Fixed costs (TFC) = $260‚000 Let the number of motors required to be sold to breakeven = Q Then Q = Total Fixed Costs (TFC) / Contribution Margin per unit (CMU) (Equation 1) CMU = Selling price per unit (SPU) – Variable cost per unit (VCU) (Equation 2) SPU = TS/TU = 864‚000/18‚000 = $48 (3) CMU = TVC/TU =
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Case Study 1: Answer 1: In the early 1980s‚ as Fuji launched an aggressive export drive‚ Kodak was attacked in the North American & European markets. Fuji was taking over the markets & made Kodak realize that it was time to be alert & more aggressive. This led to the decision of being more defensive & thus Kodak started considering Japanese market more seriously. Answer 2: I strongly believe that the charges were valid. By systematically denying Kodak’s access to Japanese distribution
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Perceptual Map Situation Analysis The Situation Analysis will help your company understand current market conditions and how the industry will evolve over the next eight years. The analysis can be done as a group or you can assign parts to individuals and then report back to the rest of the company. An online version of the Situation Analysis is available in the Getting Started area. (customers want better performing products) and for size is -0.7 (customers want smaller products). At the end of
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is the range of activity for which estimates of costs are likely to be accurate. 8. The contribution margin is equal to the selling price minus variable cost. The contribution margin ratio is the contribution margin per dollar of sales‚ i.e.‚ the contribution margin per unit divided by the sales price per unit. 9. It would not be appropriate to focus on weighted average contribution margin per unit if the units were dissimilar (e.g.‚ pencils and computers at an office supply warehouse)
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leverage- a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs. 1. A business that makes few sales‚ with each sale providing a very high gross margin‚ is said to be highly leveraged. A business that makes many sales‚ with each sale contributing a very slight margin‚ is said to be less leveraged. As the volume of sales in a business increases‚ each new sale contributes less to fixed costs and more to profitability. 2. A business that has a higher proportion
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capacity and determine if taking Hi-Valu’s proposed contract would be the optimal solution. Quantitative Analysis: * By accepting the offer‚ BBC will increase their contribution margin by $442‚290 (Exhibit 1). Although there is a loss of contribution margin equal to 3000 units of BBC’s products‚ the additional contribution margin from Hi-Valu’s proposition more than offsets the loss. * Upon accepting the offer‚ BBC will need $735‚530 per year to invest in additional assets (Exhibit 2). BBC
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