Break-Even AnalysisThere are several formulas that will be helpful for this assignment:• break-even units =fixed expenses/ (price - variable cost)• break-even price = variable cost + fixed expenses / projected units• price (target return on sales) = break-even price/(1-target return on sales %)Use the following data for answering the questions:ItemUnit CostAdvertisingConsumer PromotionPersonal SellingDealer PromotionAllocated Product Development Costs for Region$26$1,600,000$1,500,000Value6 salespeople @ $80,000 each$1,000,000$600,000QUESTION 3What is the break-even price for expected sales of 230,000 units? Round to the nearest penny.

BREAKEVEN POINTBreak Even means the volume of production or sales where there is no profit or…

Answered: Break-Even Analysis There are several…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 17GI

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If a company chooses a price to charge for its product by adding up all the expenses necessary to make the product and then adding in a profit, this is known as: a) Target Costing Ob) Skimming Pricing Oc) Cost-Based Pricing Od) Odd-Even Pricing Oe) Penetration Pricing
What can the weighted average contribution margin ratio be used for? Multiple Choice To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.
The absorption costing approach to cost-plus pricing is the safest method to use regardless of unit sales considers customer demand for the product relies on forecasted unit sales assumes that customers will pay whatever price the company decides to charge makes pricing look simple
Ouration: SO man. Total sales revertue is found by the following formula: a. sales price x quantity of advertising b. saies price x quantity of direct labor c. sales prike xquantity of units purchased d. sales price x quantity of direct materials c. sales price x quantity of units sold
Direction: Read carefully and answer the questions below. Encircle the letter of the correct answer. 1. Which of the following is an example of a variable cost? а. interest b. ingredients с. insurance d. lease 2. What type of cost varies depending on the quantity of products being produced? а. fixed b. net sales с. total d. variable 3. Which among the following concepts is usually seen on the top item in an income statement from which all costs and expenses is subtracted to arrive at net income? a. fixed cost b. net sales с. total cost d. variable cost 4. When do we obtain the break-even point? When the fixed cost is equal to the total cost When the total cost is equal to the variable cost When the variable cost is equal to the fixed cost d. When the number of units of goods sold covers the all the costs а. b. с. 5. Which of the following is NOT true? а. The fixed cost does not vary over time. b. The total cost is the sum of the fixed cost and the variable cost. с. The total cost is…
Which of the following is a true statement? O The mark-up is designed to cover all non-product costs, such as labor, utilities, supplies, interest expense, taxes, and also to provide the desired profit. Everything else being the same, the multiple for the ingredient mark-up approach to pricing will be smaller than the multiple for the prime ingredient mark-up approach. In the ingredient mark-up approach to pricing, the multiple is determined by dividing 1 by the desired product cost percentage. O All of the above. Only a. and c. above. QUESTION 21 The Hotel is located on Jeju Island, Korea, a popular honeymoon destination area. For two weeks every spring, thousands of newlyweds travel to the area for fun and relaxation. Which of the following yield management tactics would make sense for pricing rooms during these two weeks? O Refuse reservations for one-night stays. O Sell all rooms at the same rates during these two weeks. Require a three-day minimum stay at the quoted rate for each…
Cost Plus Pricing This is the most common cost-based approach to pricing a product, in which a marketer figures all costs for the product and then adds an amount to cover profit. In some cases, any costs of doing business that are not assigned to specific products. The most frequently used type of cost-plus pricing is straight markup pricing. The price is calculated by adding a predetermined percentage to the cost. Most retailers and wholesalers use markup pricing exclusively because of its simplicity - users need only estimate the unit cost and add the markup. The first step requires that the unit cost be easy to estimate accurately and that production rates are fairly consistent. We assume that a jeans’ manufacturer has fixed costs (the cost of the factory, advertising, managers’ salaries, etc.) of $2,000,000. The variable cost for a pair of jeans (the cost of fabric, zipper, thread, and labor) is $20.00. With the current plant, the firm can produce a total of 400,000 pairs of…
What can the weighted average contribution margin ratio be used for? To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.
Target costing A target cost is 'a product cost estimate derived by subtracting the desired profit margin from a competitive market price. (CIMA, 2005). Required: The target costing is cost management techniques, and discuss the advantages of using this technique within firms.
Match each of the following descriptions with the appropriate term. Clear All Plots only the difference between total sales and total costs Indicates the possible decrease in sales that may occur before operating loss results Graphically shows costs, sales, and operating profit or loss at various levels of units sold The relative distribution of sales among products sold by a company Contribution margin divided by operating income Margin of safety Operating leverage Profit-volume chart Sales mix Cost-volume-profit chart mg malt
APPLY THE CONCEPTS: Target income (sales revenue) Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows: Price and Cost Information Amount Selling Price per Unit $30 Variable Cost per Unit $15 Total Fixed Cost $15,000 For the upcoming period, the company wishes to generate operating income of $40,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income? Step 1: Calculate the contribution margin ratio: The contribution margin ratio is the contribution margin in proportion to the selling price on a…
When using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup? Total costs plus desired profit Desired profit Total selling and administrative expenses plus desired profit Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit

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