Cost‚ Volume‚ and Profit Formulas Heather Jauregui University of Phoenix of Axia College “The Cost-volume-profit (CVP) analysis is the study of the effects of changes in costs and volume on a company’s profits.” (Kimmel‚ P.‚ Weygandt‚ J.‚ & Kieso‚ D. 2003) The analysis is used to maximize efficiency in a business. In order to be effective the CVP analysis has to make several assumptions. These assumptions are that the costs can be fitted into either fixed or variable categories. The
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1. Which of the following would increase the likelihood that a company would increase its debt ratio in its capital structure? a. An increase in costs incurred when filing for bankruptcy. b. An increase in the corporate tax rate. c. An increase in the personal tax rate. d. None of the statements above is correct. ANSWER: B An increase in the corporate tax rate would mean that firms would get larger tax breaks for interest payments. Therefore‚ firms have an incentive to increase interest payments
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COST CLASSIFICATION ASSIGNMENT To classify the various costs would first of all require a definition between the two types of accounting that practically all businesses have to face and a number of key terms which are equally important. These are management accounting and financial accounting. 1. THE DIFFERENCE BETWEEN MANAGEMENT & FINANCIAL ACCOUNTING: Management accounting is concerned with decision making‚ cost apportionment‚ planning and control. It is based within the organisation and is
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of the fee increase. Mr. Chatterjee is also considering a change in promotional expenditure. This currently amounts to 2% of total revenues and it is estimated that the promotional elasticity of demand is 0.1. It is also estimated that variable costs per student are Rs.60‚000. Questions 1. Why might Mr. Chatterjee’s estimates of the relevant price elasticity not be very reliable? 2. Estimate the effect of the proposed fee increase on the number of Indian student and revenues from these students
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consists of: A. all manufacturing costs. B. indirect materials but not indirect labor. C. all manufacturing costs‚ except direct materials and direct labor. D. indirect labor but not indirect materials. 2. A variable cost is a cost whose cost per unit varies as the activity level rises and falls. A. True B. False 3. The traditional format income statement is used as an internal planning and decision-making tool. Its emphasis on cost behavior aids cost-volume-profit analysis‚ management
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Sales ($68 per unit × 410‚000 units) $27‚880‚000 Variable costs ($60 per unit × 410‚000 units) 24‚600‚000 Contribution margin $ 3‚280‚000 1b. Contribution margin (from above) $3‚280‚000 Fixed costs 1‚640‚000 Operating income $1‚640‚000 2a. Sales (from above) $27‚880‚000 Variable costs ($54 per unit × 410‚000 units) 22‚140‚000 Contribution margin $ 5‚740‚000 2b. Contribution margin $5‚740‚000 Fixed costs 5‚330‚000 Operating income $ 410‚000 3 Operating
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1: Score 0/4 Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1‚200 and the variable cost per cup of coffee served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round average cost per cup of coffee to 3 decimal places. Omit
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complexity that drive overhead costs for Forest Hill? FHPC produces 20 different grades of paperboard requiring several changes in quantities and production run. Grade changes induce instabilities into the manufacturing process that result in scrap until the process resumes stability. On average‚ production engineers estimate that approximately one-half reel is lost to scrap each time a grade change is made. Between production runs of two different products machine setup costs are incurred. How to accurately
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Overview for Saturday June 8th Instructions A. Complete the budgeting questions and any one of the others. 1. Service Cost Allocations CLASS: Teck Tecky Water Services provides water for Departments A‚B and C and has prepared its total budget using the following information for the next year:- Fixed Costs $300‚000 Budgeted Gallon Usage:- Variable Costs $0.10 per gallon Dept. A 2‚500‚000 gallons Available capacity 10‚000‚000 gallons Dept. B 2‚000‚000 gallons Dept C
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Full Cost Pricing Selling price arrived at by adding overheads and profit margin to the direct cost per unit of a product. In a manufacturer’s overheads computation‚ less than full capacity utilization of the plant is factored in to allow for fluctuations in the output. The profit margin is computed as a fixed percentage of the average total cost of the product. Pricing - full cost-plus pricing Full cost plus pricing seeks to set a price that takes into account all relevant costs of production
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