Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Textbook Question
Chapter 5, Problem 3DQ
Explain how the break-even point and operating leverage are affected by the choice of manufacturing facilities (labor intensive versus capital intensive). (LO5-2)
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Operating leverage refers to the extent to which an organization's cost structure is made up of: differential costs. opportunity costs. fixed costs. relevant costs?
the link between short-run average costs and long-run average costs? Explain the association between return to scale and economies of scale and suggest the potential sources of internal and external economies of scale. Why might firms face diseconomies of scale and shutdown/break-even situations in the long run?
____ 1. Industries that typically use process cost systems include chemicals, oil, metals, paper, and pharmaceuticals.
____ 2. The methods of evaluating capital investment proposals can be grouped into two general categories that can be referred to as (1) methods that ignore present value, and (2) present values methods.
____ 3. Variable costs are costs that remain constant in total dollar amount as the level of activity changes.
____ 4. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory.
____ 5. Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further, these costs are not considered in deciding whether to further process a product.
Chapter 5 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 5 - Discuss the various uses for break-even analysis....Ch. 5 - What factors would cause a difference in the use...Ch. 5 - Explain how the break-even point and operating...Ch. 5 - Prob. 4DQCh. 5 - What does risk taking have to do with the use of...Ch. 5 - Discuss the limitations of financial leverage....Ch. 5 - Prob. 7DQCh. 5 - Explain how combined leverage brings together...Ch. 5 - Explain why operating leverage decreases as a...Ch. 5 - Prob. 10DQ
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Draw two break-even graphs-one for a conservative...Ch. 5 - Prob. 5PCh. 5 - Shawn Pen & Pencil Sets Inc. has fixed costs of ....Ch. 5 - Calloway Cab Company determines its break-even...Ch. 5 - Prob. 8PCh. 5 - Boise Timber Co. computes its break-even point...Ch. 5 - The Sterling Tire Company’s income statement for...Ch. 5 - Prob. 11PCh. 5 - Healthy Foods Inc. sells 50-pound bags of grapes...Ch. 5 - United Snack Company sells 50-pound bags of...Ch. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Lenow’s Drug Stores and Hall’s Pharmaceuticals...Ch. 5 - The capital structure for Cain Supplies is...Ch. 5 - Sterling Optical and Royal Optical both make glass...Ch. 5 - Prob. 19PCh. 5 - Sinclair Manufacturing and Boswell Brothers Inc....Ch. 5 - DeSoto Tools Inc. is planning to expand...Ch. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Mr. Gold is in the widget business. He currently...Ch. 5 - Delsing Canning Company is considering an...Ch. 5 - Prob. 2WECh. 5 - Now click on "Financials." Look at the Income...Ch. 5 - Prob. 4WECh. 5 - Prob. 5WE
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- Which of the following is a disadvantage of outsourcing? A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize productionarrow_forwardWhich of the following best describe the term operating leverage. Multiple Choice The degree to which a firm or project relies on fixed costs . Investigation of what happens to NPV when only one variable is changed. The change in costs that occurs when there is a small change in output. Taking into account the managerial options that are implicit in a project. The determination of what happens to NPV estimates when we ask what-if questions.arrow_forwardPease help these are true/false questions. ____ 1. Industries that typically use process cost systems include chemicals, oil, metals, paper, and pharmaceuticals. ____ 2. The methods of evaluating capital investment proposals can be grouped into two general categories that can be referred to as (1) methods that ignore present value, and (2) present values methods. ____ 3. Variable costs are costs that remain constant in total dollar amount as the level of activity changes. ____ 4. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory. ____ 5. Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further, these costs are not considered in deciding whether to further process a product.arrow_forward
- Which of the following statements is CORRECT with respect to fixed costs per unit? Select one: A.They will decrease as production decreases. B.They will increase as production increases. C.They will increase as production decreases. D.They will remain the same as production levels change.arrow_forwardWhich of the following statements is CORRECT with respect to fixed costs per unit? Select one: A. They will decrease as production decreases. B. They will remain the same as production levels change. C. They will increase as production increases. D. They will increase as production decreases.arrow_forwardWhen output volume increases, do fixed costs per unit increase, decrease, or stay the same within the relevant range of activity? Explain.arrow_forward
- In representing the total manufacturing costs in the equation Y=a+bX, “a ”in the equation represents the amount of total fixed costs while the “bX”represents the amount of 1. Level of activity2. Total manufacturing costs3. Total variable manufacturing costs4. Variable cost per unit what is the best answer?arrow_forwardWhat does it mean to obtain a competitive advantage? What role does the cost management system play in helping to achieve this goal?arrow_forward41.A cost driver a. causes fixed costs to rise because of production changes. b. has a direct cause-effect relationship to a cost. c. can predict the cost behavior of a variable, but not a fixed, cost. d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.arrow_forward
- 1) Which of the following statements describes the force that drives the distribution of resources (goods and services, labor, and money) in a free-enterprise economy? A) Businesses are willing to supply more of a good or service at higher prices because the potential for profits is higher. B) Supply and demand curves intersect at the point where supply and demand are not equal. C) Changing the price of a product does not alter the supply curve. D) The price at which the number of products that businesses are willing to supply is inversely proportional to the amount of products that consumers are willing to buy at a specific point in time. E) Prices for goods and services vary according to the changes in supply and demand. 1)arrow_forward2) What is measured along the horizontal axis in a graph of the production possibility frontier? the amount of labor input the amount of capital input the quantity of one good produced the quantity of one good exportedarrow_forwardWhat are the disadvantages of cutting expenses and costs , when it comes to working capital and operating cycle?arrow_forward
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