Chapter20
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Chapter20

Course Number: ACCT 100, Spring 2011

College/University: HKU

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CHAPTER 20 COST-VOLUME-PROFIT ANALYSIS 15th edition OVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASES Brief Exercises B. Ex. 20.1 B. Ex. 20.2 B. Ex. 20.3 B. Ex. 20.4 B. Ex. 20.5 B. Ex. 20.6 B. Ex. 20.7 B. Ex. 20.8 B. Ex. 20.9 B. Ex. 20.10 Learning Objectives 1 1 1, 9 1, 4, 5, 9 46 46 1, 46 7 1 8 Learning Objectives 1, 2, 4 1, 9 4, 5 46 1, 4 57 46 46 1, 2, 46 4, 5 1, 2, 46 5, 6 1, 46 7,...

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20 CHAPTER COST-VOLUME-PROFIT ANALYSIS 15th edition OVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASES Brief Exercises B. Ex. 20.1 B. Ex. 20.2 B. Ex. 20.3 B. Ex. 20.4 B. Ex. 20.5 B. Ex. 20.6 B. Ex. 20.7 B. Ex. 20.8 B. Ex. 20.9 B. Ex. 20.10 Learning Objectives 1 1 1, 9 1, 4, 5, 9 46 46 1, 46 7 1 8 Learning Objectives 1, 2, 4 1, 9 4, 5 46 1, 4 57 46 46 1, 2, 46 4, 5 1, 2, 46 5, 6 1, 46 7, 8 9 Topic Cost behavior patterns Cost classifications Using a cost formula Using a cost formula Computing required sales volumes Computing required sales volumes Contribution margins and selling prices Evaluating marketing strategies Selecting an activity base CVP with multiple products Skills Analysis Analysis Analysis Analysis Analysis Analysis Analysis Analysis Judgment, analysis Analysis Exercises 20.1 20.2 20.3 20.4 20.5 20.6 20.7 20.8 20.9 20.10 20.11 20.12 20.13 20.14 20.15 Topic Accounting terminology High-low method of cost estimation Determining required sales volumes Computing break-even points Solving for missing information Ethical implications of CVP Using CVP Using CVP Understanding break-even relationships Margin of safety Applying CVP Solving for missing information Formulating bid prices using CVP CVP with multiple products Estimating semivariable costs Skills Analysis Analysis Analysis Analysis Analysis Judgment, communication Analysis Analysis Analysis Analysis Analysis Analysis Analysis Analysis Analysis The McGraw-Hill Companies, Inc., 2010 CH 20-Overview Problems Sets A, B 20.1 A,B 20.2 A,B 20.3 A,B 20.4 A,B 20.5 A,B 20.6 A,B 20.7 A,B 20.8 A,B Topic Establishing selling prices Estimating costs and profitability Preparing a break-even graph Preparing a break-even graph CVP analysis Cost analysis Cost analysis CVP with multiple products Learning Objectives 47 1, 4, 5 36, 9 3, 4, 6, 9 37, 9 47, 9 4, 6, 7 48 Skills Analysis, communication Analysis Analysis, communciation Analysis, communication Analysis, communication Analysis, communication Analysis, communication Analysis, communication CRITICAL THINKING CASES 20.1 CVP from differing perspectives 20.2 Evaluating marketing strategies costing information 20.3 20.4 20.5 Deciding whether to file a Form 8-K Ethics, Fraud & Corporate Governance Real World: Puma, Nike (Business Week) Real World: Ford Motor Company Internet 1 Judgment, communication 1, 4, 5, 6, 7 Communication, analysis 1 2 4 Analysis, judgment, communication Analysis, communication, research Communication, technology, research The McGraw-Hill Companies, Inc., 2010 CH 20-Overview (p.2) DESCRIPTIONS OF PROBLEMS AND CRITICAL THINKING CASES Below are brief descriptions of each problem, case, and the first Internet assignment. These descriptions are accompanied by the estimated time (in minutes) required for completion and by a difficulty rating. The time estimates assume use of the partially filled-in working papers. Problems (Sets A and B) 20.1 A,B Thermal Tent, Inc./Satka, Inc. Use of cost-volume-profit relationships in a pricing decision. Student is to compute the unit sales prices necessary to achieve a target operating income. Also determine whether the company can break even if sales price is reduced to achieve market penetration. 20.2 A,B Blaster Corporation/Snug-As-A-Bug Illustrates a pricing decision: compute the unit sales price necessary to achieve a target income at a given unit sales volume. Also compute the number of units that must be sold annually to break even at an alternative unit sales price. Stop-n-Shop/Moor-n-More A profit-volume problem requiring an annual profit graph. Draw a profit-volume graph on an annual basis. Compute the contribution margin and break-even point. Consider the effect of a change in employee compensation and determine sales necessary to produce a given income. Rainbow Paints/Green Thumb Create a cost-volume-profit graph for a retail business. Compute the break-even sales volume and the operating income likely to result at the highest and lowest expected sales volume. Simon Teguh/Ed Winslow Draw a monthly cost-volume-profit graph for a vending machine business. Determine the break-even point and the sales volume needed to provide the owner with a given return on investment. Also consider the effect of a change in costs upon the break-even point. Precision Systems/Electro Systems Compute the increase in selling price necessary to maintain contribution margin ratio after increase in direct labor cost. Compute sales volume after wage increase in order to earn a given net income. Consider the effect of expansion on maximum income that can be earned. 25 Medium 25 Medium 20.3 A,B 30 Medium 20.4 A,B 30 Medium 20.5 A,B 40 Strong 20.6 A,B 30 Strong The McGraw-Hill Companies, Inc., 2010 Description Problems 20.7 A,B Percula Farms/Dorsal Ranch Students must analyze two alternative production strategies and determine which factors or costs have the greatest influence on operating income. Given two investment options, students must first intuitively decide which should result in the greatest increase to operating income, and then perform calculations to confirm their answer. Lifefit Products/HomeTeam Sports Calculate break-even in dollars and in units for a multiple product company. Determine operating income required for a desired margin of safety. Determine sales level required for a desired level of income if fixed costs are reduced. 35 Strong 20.8 A,B 35 Strong The McGraw-Hill Companies, Inc., 2010 Desc. Problems (p.2) CRITICAL THINKING CASES 20.1 Multiple PerspectivesAttend Our Seminar Students play the role of a cost-volume-profit seminar leader. They are asked to motivate individuals to attend their seminar by showing them how the information can be of benefit. This is a good group problem that encourages students to think beyond the mechanics of cost-volumeprofit analysis. Dont Mess with the Purple Cow Students are asked to evaluate two alternative marketing proposals and make a recommendation to management. The problem contains an interesting twist: neither proposal is as profitable as the status quobut students attention is not specifically directed toward this vital issue. A lesson in the fact that real-life problems do not come with instructions that make the answers clear. 20 Medium 20.2 40 Strong 20.3 Filing Form 8-K Ethics, Fraud and Corporate Governance Students are asked to determine whether a company should file a Form 8-K and whether it is legal and/or ethical to withold certain information. Puma and NIKE Business Week Students are asked to identify potential economies of scale should NIKE acquire Puma. Ford Motor Company Internet Using information contained the company's 10-K the student is asked to analyze changing trends in the sales mix at Ford and throughout the entire U.S. Automobile industry, in general. 10 Easy 20.4 5 Easy 20.5 15 Easy The McGraw-Hill Companies, Inc., 2010 Desc. of Cases SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 1. It is important for management to understand cost-volume-profit relationships in order to do a better job of planning business operations. Cost-volume-profit analysis is a useful tool for forecasting the impact of various strategies upon operating income. An activity base is a measure of a type of business activity that drives variable costs. The activity base allows us to quantify the expected relationships between variable costs and the underlying type of business activity, such as units of production, total sales, or quantities of materials used in production. These relationships, in turn, assist us in evaluating the reasonableness of the costs incurred in prior periods and also in forecasting future costs at various levels of business activity. 2. 3. a. Total variable costs increase in approximate proportion to an increase in activity. b. As total variable costs rise in approximate proportion to an increase in activity, variable costs per unit of activity remain relatively constant. 4. a. Total fixed costs tend to remain constant despite increases in the level of business activity so long as the level of activity remains within the relevant range. b. Because total fixed costs remain constant, fixed costs per unit of activity decline as the volume of activity increases. In short, the fixed costs are spread over a greater number of units of activitytherefore, lower fixed costs per unit. 5. Two factors make the simplifying assumption of straight-line cost-volume relationships useful. First, unusual patterns of cost behavior (stair-step or curvilinear) tend to offset one another when individual cost elements are combined into total cost figures. Second, most managerial decisions are based on projected volume variations within a fairly narrow range. Within this relevant range, straight-line cost-volume relationships are often good approximations of actual operating conditions. The relevant range represents the operating levels (for example, between 40% and 80% of full capacity) over which output is likely to vary and for which the assumptions made about cost behavior are reasonably realistic. When the level of activity falls outside the relevant range, assumptions as to the total amount of fixed costs, the amount of variable costs per unit, and the degree of variability of semivariable costs may have to be changed. 6. The McGraw-Hill Companies, Inc., 2010 Q1-6 7. a. Under the high-low method, the levels of a semivariable cost and of the related activity base are observed at the highest and lowest points of activity within the relevant range. The variable portion of the semivariable cost is then determined by dividing the change in the semivariable cost by the change in the activity base between these high and low measurement points. (This is the slope of the line between these two points.) The fixed portion of the semivariable cost is determined by starting with the total semivariable cost at either the high or low level of activity, and subtracting the variable portion of the cost as computed at that level of activity. (The fixed portion is the intersection of the line with the y-axis.) The contribution margin is the dollar amount by which revenue exceeds variable costs. Thus, it is the amount of revenue that is available to cover fixed costs and to contribute to operating income. Unit contribution margin = unit sales prices variable costs per unit. The contribution margin ratio is the contribution margin stated as a percentage of sales revenue. Consequently, it represents the percentage of sales revenue available to cover fixed costs and to contribute to operating income. Contribution margin ratio = unit contribution margin/unit sales price. The average contribution margin ratio is similar in concept to the contribution margin ratio except that it is used in multiproduct environments. Consequently, it takes into account each products individual contribution margin ratio as well as the relative sales mix of all products sold. b. 8. a. b. c. 9. The important relationships shown in a cost-volume-profit graph are changes in revenue, costs, and operating income in relation to changes in the volume of business activity. The point at which a business moves from a loss to a profit position (the break-even point) is also shown, but this is relatively less important because the objective of business endeavor is to earn a high rate of return on investment, not to break even. Fixed Costs + Target Operating Income Contributing Margin Ratio $145,000 + $30,000 = $500,000 per month 0.35 10. Target Sales Volume (in dollars) = = 11. At the break-even point, a company earns a total contribution margin exactly equal to its fixed costs. By dividing the unit contribution margin into this required total contribution margin, we can determine the number of units that must be sold to enable the company to cover its fixed costs. The McGraw-Hill Companies, Inc., 2010 Q7-11 12. If the contribution margin ratio is 35%, variable costs must account for the other 65% of total revenue. If 65% of total revenue is equal to $26 per unit, the unit sales price must be $26 .65, or $40. The margin of safety is the dollar amount by which actual sales volume exceeds the break-even point. If sales volume increases by $19,000 in a company with a 40% contribution margin ratio, operating income should increase by $7,600 ($19,000 .40). A change in product (sales) mix to a higher proportion of export sales may result in a lower level of net income if the contribution margin ratio on export sales is lower than the average contribution margin ratio on all sales. This is often the case with export sales made by American companies, because sales to foreign customers are made at lower prices. Foreign sales must compete with prices charged by producers of other nations, whose production costs are often much lower than those of domestic steel companies. In addition, substantial freight charges are incurred on foreign sales; if the seller pays these charges, the contribution margin is reduced because freight is a variable expense; if the buying company pays the freight charges, it will generally insist on a lower price for the product it purchases. 13. 14. 15. 16. Fixed costs do not vary in response to changes in volume. Thus, the more intensively facilities are utilized, the lower the fixed cost per unit of output. This usually results in an overall lower unit cost. The assumption that fixed costs remain constant within a relevant range has been violated. To compensate, only in months that anticipated production reaches or exceeds 4,500 units should management factor into its analysis the additional fixed cost associated with renting a forklift. Operating income is the primary focus of cost-volume-profit analysis because income taxes and nonoperating gains and losses do not possess the characteristics of fixed or variable costs. The regional airline will probably have a higher break-even point than a furniture manufacturer because most of an airlines costs are fixed. It is important to note that even though both companies report identical revenue and net income figures, their break-even points will likely differ significantly because of differences in their cost structures. Basic assumptions underlying cost-volume-profit analysis include: (1) a constant selling price per unit, (2) a stable sales mix if more than one product is produced, (3) unchanging fixed costs within a relevant range of output, (4) stability of variable costs expressed as a percentage of sales revenue, and (5) units produced equal units sold. 17. 18. 19. 20. The McGraw-Hill Companies, Inc., 2010 Q12-20 SOLUTIONS TO BRIEF EXERCISES B. Ex. 20.1 a. Total variable costs increase approximately in proportion to an increase in the volume of activity. b. Variable costs per unit remain relatively constant at all levels of activity; this is the reason that total variable costs vary in proportion to changes in the volume of activity. c. Total fixed costs remain relatively constant despite increases in the volume of activity. d. Because total fixed costs tend to remain constant as the volume of activity increases, fixed costs per unit decline with increases in the volume of activity. e. Semivariable costs include both fixed and variable cost elements. Because of the variable cost element, total semivariable costs tend to rise as the volume of activity increases. Due to the fixed element of the semivariable cost, however, this increase is less than proportionate to the increase in the volume of activity. f. On a per-unit basis, the fixed elements of a semivariable cost decline as the volume of activity increases, but the variable elements tend to remain constant. Thus, semivariable costs per unit decline as the volume of activity rises, but not as rapidly as if the entire cost were fixed. B. Ex. 20.2 a. Variable. The cost of goods sold normally rises and falls in almost direct proportion to changes in net sales. Although fixed manufacturing overhead is a component of cost of goods sold, it is applied on a per unit basis and, therefore, acts like a variable cost. b. As described in this exercise, the salaries to salespeople are semivariable with respect to net sales. The monthly minimum amount represents a fixed cost that does not vary with fluctuations in net sales. However, the commissions on sales transactions represent a variable element of sales salaries that does fluctuate in approximate proportion to fluctuations in net sales. The McGraw-Hill Companies, Inc., 2010 BE20.1,2 c. Income taxes are not a fixed, variable, or semivariable cost with respect to net sales. Income taxes may be viewed as a variable cost, but the relevant activity base is taxable income, not net sales. (Different tax brackets complicate the analysis of income taxes expense, even given taxable income as the activity base. Therefore, cost-volume-profit analysis usually focuses upon operating incomethat is, income before income tax expense and other items that resist classification as costs that are fixed, variable, or semivariable with respect to net sales.) d. Fixed. Property tax expense is known for each period and is not affected by fluctuations in sales volume. e. Fixed. Depreciation expense on a sales showroom is independent of the level of net sales. Fluctuations in net sales have no effect upon the amount of depreciation applicable during the period to the sales showroom. (Depreciation can become a variable cost only when it is treated as a product cost, or when depreciation is computed using the units-of-output method. Neither of these situations applies to the depreciation on a sales showroom, which is a period cost.) f. Fixed. Use of an accelerated method causes depreciation expense to change from one period to the next, but the expense for each period still remains fixed with respect to fluctuations in net sales. The key idea is that fluctuations in net sales have no effect upon the amount of depreciation expense applicable to the period. B. Ex. 20.3 a. (1) Estimated cost of responding to 125 emergency calls in one month: Fixed element of monthly emergency response cost cost .. Variable cost of responding to 125 calls (125 calls $110 per call) Estimated total cost of responding to emergency calls .. (2) Average cost per call (125 calls per month): Estimated total cost of responding to 125 emergency calls per month [part a (1)] Number of calls Average cost per call ($33,250 125 calls) . $19,500 13,750 $33,250 $33,250 125 $266 The McGraw-Hill Companies, Inc., 2010 BE20.3 b. The overall cost of responding to emergency calls is semivariablethat is, it includes both fixed and variable elements. Therefore, when the volume of emergency calls is unusually low, the average cost of responding to each call will rise, because the fixed cost elements must be spread over fewer calls. B. Ex. 20.4 a. Contribution margin ratio = 70% (100%, minus variable costs of 30%) b. Break-Even Sales Volume Fixed Costs + Target Profit = Contribution Margin Ratio $5,950 + $0 0.70 = = $8,500 c. Fixed element of room service costs Variable element of room service costs ($15,000 30 %) Estimated total room service costs in a month generating $15,000 room service revenue B. Ex. 20.5 $5,950 4,500 $10,450 a. If contribution margin ratio is 40%, variable costs must be 60% of sales price. Unit sales price = $24 variable costs 0.60 = $40 Unit Contribution Margin = Unit Sales Price Variable Cost per Unit = $40 (above) - $24 = $16 b. Sales Volume (in units) = Fixed Costs + Target Operating Income Unit Contribution Margin $660,000 + $300,000 $16 = = 60,000 units c. Sales Volume (in dollars) = = = Fixed Costs + Target Operating Income Contribution Margin Ratio $660,000 + $300,000 0.40 $2,400,000 [or 60,000 units (part b) x ($40 unit sales price (part a) = $2,400,000] The McGraw-Hill Companies, Inc., 2010 BE20.4,5 B. Ex. 20.6 a. If variable costs are 70% of sales revenue, the contribution margin ratio must be (1 - 0.70) = 30% b. Break-Even Sales Volume = Fixed Costs CM ratio Fixed Costs 0.30 ; Fixed Costs = $4,500 $15,000 = c. Sales Volume = Fixed Costs + Target Operating Income Contribution Margin Ratio $4,500 + $9,000 0.30 = = $45,000 B. Ex. 20.7 a. Break-even sales volume ($80 $25,000 units) Contribution margin ratio . Fixed costs ($2,000,000 0.45) . b. Break-even sales volume ($80 25,000 units) Less: Fixed costs (part a) Variable cost of 25,000 units Variable cost per unit ($1,100,000 25,000 units) $2,000,000 45% $ 900,000 $2,000,000 900,000 $1,100,000 $44 Alternatively, if the contribution margin ratio is 45%, variable costs must amount to 55% of the unit sales price. Thus, $80 sales price 55% = $44. c. Total costs = fixed costs + (variable cost per unit number of units) = $900,000 + ($44 number of units) B. Ex. 20.8 a. b. $4,000 $6,222 ($1,800 additional monthly fixed cost, divided by 45% contribution margin) [($1,800 additional cost + $1,000 target operating income) 45%] The McGraw-Hill Companies, Inc., 2010 BE20.6,7,8 B. Ex. 20.9 The following activity bases could be suggested to each of your clients: Client Freemans Retail Floral Shop Susquehanna Trails Bus Service Pump Manufacturers Wilson Possible Activity Bases Sales dollars Passenger miles driven Number of pumps produced Sales dollars Machine hours Direct labor hours Billable client hours Number of cases McCauley & Pratt, Attorneys at Law B. Ex. 20.10 a. Flashlights Batteries Contribution Margin Ratio 40% 20% Percentage of Total Sales Average = Contribution 15% 85% Average contribution margin ratio 6% 17% 23% Fixed Costs/Average Contribution Margin Ratio = Break-Even Sales Revenue $3,680,000 23% = $16,000,000 b. Fixed Costs + Target Operating Income Average Contribution Margin Ratio = Target Revenue ($3,680,000 + $1,380,000) 23% = $22,000,000 The McGraw-Hill Companies, Inc., 2010 BE20.9,10 SOLUTIONS TO EXERCISES Ex. 20.1 a. b. c. d. e. f. g. h. Break-even point Fixed costs Relevant range Contribution margin Unit contribution margin Economies of scale Semivariable costs None (This is not a meaningful measurement; variable costs have already been deducted in arriving at operating income.) Machine Hours 5,500 2,800 2,700 Manufacturing Overhead $311,500 184,600 $126,900 Ex. 20.2 a. (1) High point Low point Changes Thus, the estimated variable element of Bursa Mfg. Co.s manufacturing overhead is $47 per machine hour. [$126,900 change in cost divided by 2,700 unit change in the activity base (machine hours)]. (2) Total manufacturing overhead at 5,500 machine-hour level . Variable element of manufacturing overhead at 5,500 machine-hour level (5,500 machine hours $47 per machine hour) .. Fixed element of manufacturing overhead .... b. Estimated manufacturing overhead at activity level of 5,300 machine hours: Fixed element [part a (2)] .. Variable cost element ($47 per machine hour 5,300 machine hours) ... Total estimated manufacturing overhead . c. Estimated manufacturing overhead: February: $53,000 + ($47 per MH 3,200 MH) .... March: $53,000 + ($47 per MH 4,900 MH) ..... Actual manufacturing overhead ..... Amount over (under) estimated .... February $203,400 $283,300 263,800 $19,500 $311,500 258,500 $53,000 $53,000 249,100 $302,100 March 224,000 $(20,600) The McGraw-Hill Companies, Inc., 2010 E20.1,2 Ex. 20.3 a. Unit contribution margin, $70 $43 = $27 b. Sales required to break even, $405,000 $27 = 15,000 units c. ($405,000 + $270,000) $27 = 25,000 units a. Contribution margin ratio Relative sales mix Product 1 60% 40% 24% Fixed Costs Contribution Margin Ratio Product 2 30% 60% 18% = 42% Ex. 20.4 + Break-Even in Sales = Break-Even in Sales = $63,000 42% = $150,000 b. Contribution margin ratio Relative sales mix Product 1 60% 25% 15% Product 2 30.0% 75.0% 22.5% = 37.5% + Break-Even in Sales = Fixed Costs + Target Operating Income Contribution Margin Ratio Break-Even in Sales = ($63,000 + $12,000) 37.5% = $200,000 Ex. 20.5 a. Sales $200,000 180,000 600,000 Variable Costs $120,000 105,000 360,000 Contribution Margin Ratio (%) per Unit $20 15 30 Contribution Margin Ratio Ratio (%) (%) 20% 40% 30% (1) (2) (3) Fixed Operating Costs Income $55,000 $25,000 45,000 30,000 150,000 90,000 Units Sold 4,000 5,000 8,000 b. (1) (2) (3) Sales $900,000 600,000 500,000 Variable Costs $720,000 360,000 350,000 Fixed Operating Costs Income $85,000 $95,000 165,000 75,000 90,000 60,000 The McGraw-Hill Companies, Inc., 2010 E20.3,4,5 Ex. 20.6 It is never ethical to lie to ones employees. This type of behavior will only serve to promote an atmosphere of distrust throughout the company. Rather than attempting to motivate the sales force by lying about sales quotas, the company should consider rewarding regional sales managers using commissions and bonuses. a. Contribution Margin Ratio = Unit Sales Price - Variable Cost per Unit Unit Sales Price $28 $7 = 75% $28 Fixed Costs + $0 Contribution Margin Ratio $240,000 = $320,000 0.75 Ex. 20.7 = b. Break-Even Sales Volume = = c. Sales Volume = Fixed Costs + Target Operating Income Contribution Margin Ratio $240,000 + $450,000 0.75 = = $920,000 d. Sales volume (40,000 units x $28) Less: Break-even sales volume (per part b) Margin of safety at 40,000 units $1,120,000 320,000 $800,000 e. Operating Income = Margin of Safety Contribution Margin Ratio = $800,000 0.75 = $600,000 The McGraw-Hill Companies, Inc., 2010 E20.6,7 Ex. 20.8 a. Projected operating Income without either investment: ($1,200,000 0.25) - $80,000 $220,000 Projected sales revenue CM ratio Total contribution margin minus fixed costs Operating income Ad Campaign $1,260,000 (1) 0.25 $315,000 (100,000) $215,000 Ordering System $1,200,000 0.30 $360,000 (100,000) $260,000 Thus projected operating income will decrease by $5,000 if the ad campaign is chosen ($215,000 - $220,000), and increase by $40,000 ($260,000 - $220,000) if the ordering system is chosen. (1) ($1,200,000 x 1.05) b. For the ad campaign to result in an equal increase in operating income, the total contribution margin produced must equal that of the ordering system ($360,000). Sales Revenue x 25% = $360,000 Sales Revenue = $1,440,000 Percentage Increase = $1,440,000 - $1,200,000 $1,200,000 = 20% The McGraw-Hill Companies, Inc., 2010 E20.8 Ex. 20.9 a. Contribution margin per unit: Unit saleC price Less: Variable cost per unit ($50,000 $40,000 units) o Contribution margin per unit n b. Margin of safety at sales of 45,000 units: Sales revenue ($1.75 $45,000 units) Less: Sales revenue at break-even point ($1.75 $40,000 units) Margin of safety $1.75 1.25 $0.50 $78,750 70,000 $8,750 c. Estimated operating loss at sales level of 38,000 units: Sales revenue ($1.75 38,000 units) Less: Variable costs ($1.25 38,000 units) Fixed costs (given) Operating Income (loss) d. (1) Unit cost at production level of 40,000 units: Variable cost per unit Fixed cost per unit ($20,000 40,000 units) Total unit cost (2) Unit cost at production level of 50,000 units: Variable cost per unit Fixed cost per unit ($20,000 50,000 units) Total unit cost $66,500 $47,500 20,000 67,500 $(1,000) $1.25 0.50 $1.75 $1.25 0.40 $1.65 Total cost per unit declines at higher production levels because the fixed manufacturing costs are allocated over a greater number of units. The McGraw-Hill Companies, Inc., 2010 E20.9 Ex. 20.10 a. Contribution Margin = Ratio = Unit Sales Price - Variable Costs Sales Price $24 - $18 = 25% $24 Fixed Costs Contribution Margin Ratio $240,000 = $960,000 0.25 $1,800,000 960,000 $840,000 $16 (8) (4) $4 $150,000 350,000 $500,000 $500,000 $4 125,000 25% $500,000 100,000 $600,000 25% $2,400,000 $500,000 25% $2,000,000 $3,800,000 (2,000,000) $1,800,000 Break-Even Sales Volume = = b. Sale volume at 75,000 units (75,000 $24) . Less: Break-even sales volume (part a) Margin of safety sales volume Ex. 20.11 a. Selling price per unit Variable manufacturing costs per unit. Variable selling and administrative costs per unit Contribution margin per unit Fixed manufacturing costs .. Fixed selling and administrative costs .. Total fixed costs .. Total fixed costs Divided by contribution margin per unit Monthly break-even in units b. Contribution margin ratio (CM SP) .. Total fixed costs Target monthly income Divided by contribution margin ratio . Sales revenue required c. Total fixed costs Contribution margin ratio Monthly break-even sales revenue Current monthly sales level Monthly break-even sales revenue Margin of safety The McGraw-Hill Companies, Inc., 2010 E20.10,11 d. Anticipated increase in sales revenue . Contribution margin ratio Estimated increase in operating income . Ex. 20.12 20,000 units x $7 per unit = $140,000 total fixed costs Fixed Costs Contribution Margin = Break-Even in Units $140,000 (SP - $26) = 10,000 units 10,000 SP - $260,000 = $140,000 10,000 SP = $400,000 SP = Selling Price = $40 per unit Ex. 20.13 a. The lowest bid price required to maintain the current level of operating income equals total variable cost per unit: Direct materials .. Direct labor . Variable manufacturing overhead .. Lowest bid price to maintain current income level $200,000 x 25% $50,000 $9 8 7 $24 b. Contribution Margin Ratio (CM%) = Contribution Margin (CM) Selling Price (SP) 36% = (SP - $9 - $8 - $7 - .04 SP) SP 0.36 SP = 0.96 SP - $24 $24 = 0.60 SP SP = Bid Price = $40 The McGraw-Hill Companies, Inc., 2010 E20.12,13 Ex. 20.14 a. Unit selling prices Unit variable costs Unit contribution margins Divided by unit selling prices Unit contribution margin ratios Vests $120 (60) $60 120 50% Skis $300 (210) $90 300 30% Ropes $50 (10) $40 50 80% Average = CM 10% 21% 8% 39% Vests Skis Ropes Average contribution margin ratio CM% 50% 30% 80% x Mix % 20% 70% 10% Fixed Costs Average Contribution Ratio (CM%) = Break-Even Sales Revenue $741,000 39% = $1,900,000 b. (Fixed Costs + Operating Income)/CM% = Sales Revenue Required ($741,000 + $234,000) 39% = $2,500,000 c. To maximize operating income, the marketing manager should pursue a strategy that shifts the sales mix away from the products with the lowest contribution margin ratios (vests and skis) to the product with the highest contribution margin ratio (ropes). Ex. 20.15 a. ($980,000 - $752,500) (19,200 DLH - $12,700 DLH) = $35 per DLH b. $980,000 = Monthly Fixed Costs + ($35 19,200 DLH) Monthly Fixed Costs = $980,000 - $672,000 = $308,000 c. Total 3-Month Cost = ($308,000 3 months) + ($35 50,000 DLH) Total 3-Month Cost = $924,000 + $1,750,000 = $2,674,000 The McGraw-Hill Companies, Inc., 2010 E20.14.15 SOLUTIONS TO PROBLEMS SET A 25 Minutes, Easy PROBLEM 20.1A THERMAL TENT, INC. a. Required contribution margin per unit Budgeted operating Income Fixed costs Total required contribution margin Number of units to be produced and sold Required contribution margin per unit ($800,000 50,000 units) Required sales price per unit: Required contribution margin per unit Variable costs and expenses per unit Total required unit sales price $260,000 540,000 $800,000 50,000 $16 $16 84 $100 b. Break-Even Sales Volume (in units) = Fixed Costs Contribution Margin per Unit $540,000 $16 = = 33,750 Margin units c. of safety at 50,000 units: Sales volume at 50,000 units ($100 50,000 units) Less: Break-even sales volume ($100 $33,750 units) Margin of safety Operating Income at 50,000 units: Margin of safety Contribution margin ration ($100 - $84) $100 Operating Income ($1,625,000 .16) $5,000,000 3,375,000 $1,625,000 $1,625,000 .16 $260,000 The McGraw-Hill Companies, Inc., 2010 P20.1A PROBLEM 20.1A THERMAL TENT, INC. (concluded) d. No. With a unit sales price of $94, the break-even sales volume in units is 54,000 units: Unit contribution margin = $94 - $84 variable costs = $10 Break-even sales volume (in units) = $540,000 $10 = 54,000 units Unless Thermal Tent has the ability to manufacture 54,000 units (or lower fixed and/or variable costs), setting the unit sales price at $94 will not enable Thermal Tent to break even. The McGraw-Hill Companies, Inc., 2010 P20.1A (p.2) 25 Minutes, Medium PROBLEM 20.2A BLASTER CORP. a. Sales price per unit: Budgeted costs Add: Budgeted operating income Budgeted sales revenue Sales price per unit ($3,150,000 30,000 units) b. (1) Total fixed costs: Manufacturing overhead ($720,000 75%) Selling and adminstrative expenses ($600,000 80%) Total fixed costs (2) Variable costs and expenses per unit: Direct materials Direct labor Manufacturing overhead ($24 25%) Selling and administrative expense ($20 20%) Total variable costs per unit (3) Unit contribution margin: Sales price per unit Less: Variable costs per unit [from (2)] Unit contribution margin (4) Number of units required to break even: Fixed costs [from (1)] Contribution margin per unit [from (3)] Number of units required to break even ($1,020,000 $80) $2,250,000 900,000 $3,150,000 $105 $540,000 480,000 $1,020,000 $21 10 6 4 $41 $121 41 $80 $1,020,000 $80 12,750 The McGraw-Hill Companies, Inc., 2010 P20.2A 30 Minutes, Medium PROBLEM 20.3A STOP-N-SHOP a. The McGraw-Hill Companies, Inc., 2010 P20.3A PROBLEM 20.3A STOP-N-SHOP (continued) Operating data: Revenue per parking-space hour Variable costs per parking-space hour Fixed costs per year: Supervisors salary Wages ($300 52 5) Rent on lot ($7,250 12) Fixed maintenance and other expenses ($3,000 12) Total fixed costs Capacity = 800 spaces 2,500 hours per year = 2,000,000 parking-space hours per year Revenue at full capacity = 2,000,000 $0.50 = $1,000,000 per year 50 cents 5 cents $24,000 78,000 87,000 36,000 $225,000 The McGraw-Hill Companies, Inc., 2010 P20.3A (p.2) PROBLEM 20.3A STOP-N-SHOP (concluded) b. Contribution margin ratio: Parking charge per hour Less: Variable costs per unit Contribution margin per unit Contribution margin ratio ($0.45 $0.50) Break-even sales volume: Fixed costs: Rent on lot ($7,250 12) Supervisor's salary Wages ($300 52 5) Fixed maintenance and other costs ($3,000 12) Total annual fixed costs Contribution margin ratio (above) Break-even sales volume ($225,000 0.90) c. (1) New contribution margin ratio per parking-space hour: Parking charge per hour Less: Variable costs ($0.05 + $0.15) Contribution margin per unit New contribution margin ratio ($0.30 $0.50) New level of fixed costs: Rent on lot ($7,250 12) Supervisors salary Vacation pay ($300 2 5) Fixed maintenance and other costs ($3,000 12) Total fixed costs under new arrangement $0.50 0.05 $0.45 90% $87,000 24,000 78,000 36,000 $225,000 90% $250,000 $0.50 0.20 $0.30 60% $87,000 24,000 3,000 36,000 $150,000 (2) Required sales revenue to produce desired operating income: Total fixed costs under new arrangement (above) Add: Target profit Total contribution margin required New contribution margin ratio (above) Sales volume ($450,000 0.60) $150,000 300,000 $450,000 60% $750,000 The McGraw-Hill Companies, Inc., 2010 P20.3 (p.3) 30 Minutes, Medium PROBLEM 20.4A RAINBOW PAINTS a. Contribution margin ratio: Unit sales price Less: Variable costs per unit Contribution margin per gallon Contribution margin ratio ($4 10, the unit sales price) $10 6 $4 40% Break-even sales volume in dollars: Fixed costs ($3,160 + $3,640 + $1,200) Contribution margin ratio (above) Break-even sales volume in dollars ($8,000 0.4) Break-even sales volume in gallons: Break-even sales volume in dollars (above) Unit sales price Break-even sales volume in gal. ($20,000 $10 per gal.) b. On the following page. $8,000 40% $20,000 $20,000 10 2,000 c. Projected operating income at various levels: Contribution margin per gallon ($10 - $6) Total contribution margin at indicated volume Less: Fixed costs Projected monthly operating income 2,200 Gallons 2,600 Gallons $4 $4 $8,800 $10,400 8,000 8,000 $800 $2,400 The McGraw-Hill Companies, Inc., 2010 P20.4A The McGraw-Hill Companies, Inc., 2010 P20.4A PROBLEM 20.4A RAINBOW PAINTS (concluded) b. The McGraw-Hill Companies, Inc., 2010 P20.4A (p.2) 40 Minutes, Strong PROBLEM 20.5A SIMON TEGUH a. Unit contribution margin: Sales price per unit Less: Variable costs per unit: Merchandise Rental commission Unit contribution margin $0.75 $0.25 0.05 0.30 $0.45 Break-even volume in units: Monthly fixed costs: Depreciation ($36,000 0.20 1/12) Wages Other Total monthly fixed costs Contribution margin per unit (above) Break-even volume in units ($2,700 $0.45) $600 1,500 600 $2,700 $0.45 6,000 Break-even volume in dollars: Break-even volume in units (above) Unit sales price Break-even volume in dollars (6,000 units $0.75) 6,000 $0.75 $4,500 b. See following page. c. Sales volume to produce operating income equal to 30% return on investment: Total monthly fixed costs (part a) Desired operating income ($45,000 30% 1/12) Total desired contribution margin Contribution margin per unit (part a) Sales volume in units ($3,825 $0.45 per unit) Sales volume in dollars (8,500 units $0.75 per unit) $2,700 1,125 $3,825 $0.45 8,500 $6,375 d. New monthly fixed costs [$2,700 + (20 $30)] New contribution margin per unit: Unit sales price Less: Variable costs per unit (only merchandise cost) New break-even volume in units ($3,300 $0.50 per unit) $3,300 $0.75 0.25 $0.50 6,600 The McGraw-Hill Companies, Inc., 2010 P20.5A PROBLEM 20.5A SIMON TEGUH (concluded) b. The McGraw-Hill Companies, Inc., 2010 P20.5A (p.2) 30 Minutes, Strong PROBLEM 20.6A PRECISION SYSTEMS a. Variable costs per unit before 15% increase in the cost of direct labor Increase in cost of direct labor, 15% of $20 Variable costs and expenses per unit after 15% increase in the cost of direct labor $60 3 $63 Because the contribution margin ratio of 40% is required, the variable costs of $63 per unit must equal 60% of sales price after the wage increase. New sales price, $63 0.60 Sales price before increase Required increase in sales price per unit $105 100 $5 b. Unit contribution margin: Sales price per unit Less: Variable costs per unit following 15% increase in direct labor cost (part a) Unit contribution margin $100 63 $37 Sales volume required to maintain current operating income: Sales Volume = Fixed Costs + Target Operating Income Unit Contribution Margin $390,000 + $350,000 $37 = $20,000 units Current Capacity (20,000 Units) Total contribution margin ($37 per unit) Less: Fixed costs Operating income at full capacity *$390,000 + additional depreciation per year on new machinery, $140,000 (20% of $700,000). $740,000 390,000 $350,000 After Expansion (25,000 Units) $925,000 530,000* $395,000 = c. The McGraw-Hill Companies, Inc., 2010 P20.6A 35 Minutes, Strong PROBLEM 20.7A PERCULA FARMS Clownfish Angelfish 50,000 $10 $500,000 a. Raising clownfish will result in the highest operating income. Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water changes Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income 100,000 $4 $400,000 $5,500 78,750 35,000 14,000 $133,250 $266,750 80,000 $186,750 $9,500 150,000 100,000 20,000 $279,500 $220,500 80,000 $140,500 b. The most important factors in determining operating income are survival rates, and the costs of feeding and water changes. c. and d. Operating income with new filter material: Clownfish Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water changes Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income 120,000 $4 $480,000 Angelfish 60,000 $10 $600,000 $5,500 84,000 35,000 14,000 $138,500 $341,500 88,000 $253,500 $9,500 160,000 50,000 20,000 $239,500 $360,500 88,000 $272,500 Percula will earn the highest operating income by purchasing the new filter material and raising angelfish. The McGraw-Hill Companies, Inc., 2010 P20.7A PROBLEM 20.7A PERCULA FARMS (concluded) c. and d. Operating income with new heating and lighting equipment: Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water changes Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income Clownfish 105,000 $4 $420,000 Angelfish 55,000 $10 $550,000 $5,500 78,750 35,000 10,500 $129,750 $290,250 88,000 $202,250 $9,500 150,000 100,000 15,000 $274,500 $275,500 88,000 $187,500 The McGraw-Hill Companies, Inc., 2010 P20.7A (p.2) 35 Minutes, Strong PROBLEM 20.8A LIFEFIT PRODUCTS a. Contribution margins of product lines: Shoes ($15 contribution margin $50 sales price) Shorts ($4 contribution margin $5 sales price) 30% 80% b. (1) Average contribution margin ratio: From shoes (30% contribution margin 80% of sales mix) From shorts (80% contribution margin 20% of sales mix) Average contribution margin ratio Monthly operating income: Total sales Average contribution margin ratio Total contribution margin ($1,000,000 40%) Less: Fixed costs and expenses Operating income Monthly break-even sales volume (in dollars): Fixed costs and expenses Average contribution margin ratio Break-even sales volume ($378,000 40%) 24% 16% 40% (2) $1,000,000 40% $400,000 378,000 $22,000 (3) $378,000 40% $945,000 c. Assuming new sales mix (shoes, 70%; shorts, 30%) (1) Average contribution margin ratio: From shoes (30% contribution margin 70% of sales) From shorts (80% contribution margin 30% of sales) Average contribution margin ratio (2) Monthly operating income: Total sales Average contribution margin ratio Total contribution margin ($1,000,000 45%) Less: Fixed costs and expenses Operating income Monthly break-even sales volume (in dollars): Fixed costs and expenses Average contribution margin ratio Break-even sales volume ($378,000 45%) 21% 24% 45% $1,000,000 45% $450,000 378,000 $72,000 (3) $378,000 45% $840,000 The McGraw-Hill Companies, Inc., 2010 P20.8A PROBLEM 20.8A LIFELIFT PRODUCTS (concluded) d. In the new sales mix, increased sales of shorts have replaced some sales of shoes. Shorts have a much higher contribution margin than shoes. Thus, at a given sales volume, selling shorts instead of shoes provides more contribution margin, contributes more toward operating income, and lowers the sales volume required to break even. The McGraw-Hill Companies, Inc., 2010 P20.8A (p.2) SOLUTIONS TO PROBLEMS SET B 25 Minutes, Medium PROBLEM 20.1B SATKA, INC. a. Required contribution margin per unit Budgeted operating Income Fixed costs Total required contribution margin Number of units to be produced and sold Required contribution margin per unit ($1,200,000 30,000 units) Required sales price per unit: Required contribution margin per unit Variable costs and expenses per unit Total required unit sales price $400,000 800,000 $1,200,000 30,000 $40 $40 100 $140 b. Break-Even Sales Volume (in units) = Fixed Costs Contribution Margin per Unit $800,000 $40 = = 20,000 units c. Margin of safety at 30,000 units: Sales volume at 30,000 units ($140 x 30,000) Less: Break-even sales volume ($140 x $20,000) Margin of safety $4,200,000 2,800,000 $1,400,000 The McGraw-Hill Companies, Inc., 2010 P20.1B PROBLEM 20.1B SATKA, INC. (concluded) d. Yes. With a unit sales price of $132, the break-even sales volume in units is 25,000 units: Unit contribution margin = $132 - $100 variable costs = $32 Break-even sales volume (in units) = $800,000 $32 = 25,000 units Given current demand of 30,000 units, the company can still generate an operating income of $160,000 with a selling price of $132 (5,000 units above break-even $32 contribution margin per unit = $160,000). The McGraw-Hill Companies, Inc., 2010 P20.1B (p.2) 25 Minutes, Medium PROBLEM 20.2B SNUG-AS-A-BUG a. Sales price per unit: Budgeted costs Add: Budgeted operating income Budgeted sales revenue Sales price per unit ($5,360,000 80,000 units) b. (1) Total fixed costs: Manufacturing overhead ($2,400,000 90%) Selling and adminstrative expenses ($800,000 60%) Total fixed costs (2) Variable costs and epenses per unit: Direct materials Direct labor Manufacturing overhead ($30 10%) Selling and administrative expense ($10 40%) Total variable costs per unit (3) Unit contribution margin: Sales price per unit Less: Variable costs per unit [from (2)] Unit contribution margin (4) Number of units required to break even: Fixed costs [from (1)] Contribution margin per unit [from (3)] Number of units required to break even ($2,640,000 $44) $4,800,000 560,000 5,360,000 $67 $2,160,000 480,000 $2,640,000 $18 2 3 4 $27 $71 27 $44 $2,640,000 44 60,000 The McGraw-Hill Companies, Inc., 2010 P20.2B 30 Minutes, Medium PROBLEM 20.3B MOOR-N-MORE MOOR-N-MORE Cost-Volume-Profit Graph Annual Basis a. The McGraw-Hill Companies, Inc., 2010 P20.3B PROBLEM 20.3B MOOR-N-MORE (continued) Operating data: Revenue per mooring-space hour Variable costs per mooring-space hour Fixed costs per year: General manager's salary Wages ($250 52 3) Rent ($5,000 12) Fixed city taxes ($1,500 12) Total fixed costs Capacity = 80 spaces 3,000 hours per year = 240,000 moor-space hours per year Revenue at full capacity = 240,000 $5 = $1,200,000 per year $5 10 cents $32,940 39,000 60,000 18,000 $149,940 The McGraw-Hill Companies, Inc., 2010 P20.3B (p.2) PROBLEM 20.3B MOOR-N-MORE (concluded) b. Contribution margin ratio: Mooring charge per hour Less: Variable costs per unit Contribution margin per unit Contribution margin ratio ($5.00 $0.10) Break-even sales volume: Fixed costs: Rent ($5,000 12) General Manager's salary Wages ($250 52 3) Fixed city taxes ($1,500 12) Total annual fixed costs Contribution margin ratio (above) Break-even sales volume ($149,940 98%) c. (1) New contribution margin ratio per parking-space hour: Mooring charge per hour Less: Variable costs ($0.10 + $0.20) Contribution margin per unit New contribution margin ratio ($4.70 $5.00) New level of fixed costs: Rent ($5,000 12) General Manager's salary Vacation pay ($250 2 3) Fixed city taxes ($1,500 12) Total fixed costs under new arrangement $5.00 0.10 $4.90 98% $60,000 32,940 39,000 18,000 $149,940 98% $153,000 $5.00 0.30 $4.70 94% $60,000 32,940 1,500 18,000 $112,440 (2) Required sales revenue to produce desired operating income: Total fixed costs under new arrangement (above) Add: Target profit Total contribution margin required New contribution margin ratio (above) Sales volume ($225,000 94%) $112,440 112,560 $225,000 94% $239,362 The McGraw-Hill Companies, Inc., 2010 P20.3B (p.3) 30 Minutes, Medium PROBLEM 20.4B GREEN THUMB a. Contribution margin ratio: Unit sales price Less: Variable costs per unit Contribution margin per bag Contribution margin ratio ($8 $20) $20 12 $8 40% Break-even sales volume in dollars: Fixed costs ($5,000 + $2,400 + $1,600) Contribution margin ratio (above) Break-even sales volume in dollars ($9,000 40%) Break-even sales volume in bags: Break-even sales volume in dollars (above) Unit sales price Break-even sales volume in bags ($22,500 $20) $9,000 40% $22,500 $22,500 $20 1,125 b. On the following page. c. Projected operating income at various levels: Contribution margin per bag ($20 - $12) Total contribution margin at indicated volume Less: Fixed costs Projected monthly operating income 1,500 bags $8 $12,000 9,000 $3,000 1,800 bags $8 $14,400 9,000 $5,400 The McGraw-Hill Companies, Inc., 2010 P20.4B PROBLEM 20.4B GREEN THUMB (concluded) b. GREEN THUMB Cost-Volume-Profit Graph Monthly Basis The McGraw-Hill Companies, Inc., 2010 P20.4B (p.2) 40 Minutes, Strong PROBLEM 20.5B ED WINSLOW a. Unit contribution margin: Sales price per unit Less: Variable costs per unit: Merchandise Rental commission Unit contribution margin $3.20 $1.10 0.10 1.20 $2.00 Break-even volume in units: Monthly fixed costs: Depreciation ($60,000 0.20 1/12) Wages Other Total monthly fixed costs Contribution margin per unit (above) Break-even volume in units ($3,000 $2) $1,000 1,800 200 $3,000 2 1,500 Break-even volume in dollars: Break-even volume in units (above) Unit sales price Break-even volume in dollars (1,500 units $3.20) 1,500 $3.20 $4,800 b. See following page. c. Sales volume to produce operating income equal to 12% return on investment: Total monthly fixed costs (part a) Desired operating income ($70,000 12% 1/12) Total desired contribution margin Contribution margin per unit (part a) Sales volume in units ($3,700 $2) Sales volume in dollars (1,850 $3.20) $3,000 700 $3,700 $2 1,850 $5,920 d. New monthly fixed costs [$3,000 + ($45 50)] New contribution margin per unit: Unit sales price Less: Variable costs per unit (only merchandise cost) New break-even volume in units ($5,250 $2.10) $5,250 $3.20 1.10 $2.10 2,500 The McGraw-Hill Companies, Inc., 2010 P20.5B PROBLEM 20.5B ED WINSLOW (concluded) b. ED WINSLOW Cost-Volume-Profit Chart Monthly Basis The McGraw-Hill Companies, Inc., 2010 P20.5B (p.2) 30 Minutes, Strong PROBLEM 20.6B ELECTRO SYSTEMS a. Variable costs per unit before 20% increase in the cost of direct labor Increase in cost of direct labor, 20% of $1.00 Variable costs and expenses per unit after 20% increase in the cost of direct labor $6.00 0.20 $6.20 Because the contribution margin ratio of 60% is required, the variable costs of $6.20 per unit must equal 40%of sales price after the wage increase. New sales price, $6.20 40% Sales price before increase Required increase in sales price per unit $15.50 15.00 $0.50 b. Unit contribution margin: Sales price per unit Less: Variable costs per unit following 20% increase in direct labor cost (part a) Unit contribution margin $15.00 6.20 $8.80 Sales volume required to maintain current operating income: Sales Volume = Fixed Costs + Target Operating Income Unit Contribution Margin $1,000,000 + $800,000 $8.80 = 204,545 (rounded) Current Capacity 210,000 Units Total contribution margin ($8.80 per unit) Less: Fixed costs Operating income at full capacity Fixed costs after the expansion: $1,000,000 + $100,000 depreciation expense ($500,000 5 years). $1,848,000 1,000,000 848,000 After Expansion 220,500 Units $1,940,400 1,100,000 840,400 = c. The McGraw-Hill Companies, Inc., 2010 P20.6B 35 Minutes, Strong PROBLEM 20.7B DORSAL RANCH Cod Salmon 200,000 $9 $1,800,000 a. Raising cod will result in the highest operating income. Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water treatments Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income 300,000 $5 $1,500,000 $14,000 336,000 24,000 12,000 $386,000 $1,114,000 900,000 $214,000 $18,000 700,000 60,000 15,000 $793,000 $1,007,000 900,000 $107,000 b. The most important factors in determining operating income are survival rates, and the costs of feeding and water changes. c. and d. Operating income with new filter material: Cod Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water treatments Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income 400,000 $5 $2,000,000 Salmon 280,000 $9 $2,520,000 $14,000 403,200 24,000 12,000 $453,200 $1,546,800 920,000 $626,800 $18,000 840,000 30,000 15,000 $903,000 $1,617,000 920,000 $697,000 Dorsal will earn the highest operating income by purchasing the new filter material and raising salmon. The McGraw-Hill Companies, Inc., 2010 P20.7B PROBLEM 20.7B DORSAL RANCH (concluded) c. and d. Operating income with new heating and lighting equipment: Number of salable fish sale price Total revenue Variable costs: Eggs Feedings Water treatments Heating and lighting Total variable costs Total contribution margin Fixed costs: Operating income Cod 320,000 $5 $1,600,000 Salmon 220,000 $9 $1,980,000 $14,000 336,000 24,000 10,000 $384,000 $1,216,000 920,000 $296,000 $18,000 700,000 60,000 12,500 $790,500 $1,189,500 920,000 $269,500 The McGraw-Hill Companies, Inc., 2010 P20.7B (p.2) 35 Minutes, Strong PROBLEM 20.8B HOMETEAM SPORTS a. Contribution margins of product lines: Hats ($6 $20) Shirts ($21 $28) 30% 75% b. (1) Average contribution margin ratio: Hats (30% 40% mix) Shirts (75% 60% mix) Average contribution margin ratio Monthly operating income: Total sales Average contribution margin ratio Total contribution margin ($1,500,000 57%) Less: Fixed costs and expenses Operating income Monthly break-even sales volume (in dollars): Fixed costs and expenses Average contribution margin ratio Break-even sales volume ($684,000 57%) 12% 45% 57% (2) $1,500,000 57% $855,000 684,000 $171,000 (3) $684,000 57% $1,200,000 c. Assuming new sales mix (shirts, 40%; hats, 60%) (1) Average contribution margin ratio: Hats (30% 60%) Shirts (75% 40%) Average contribution margin ratio (2) Monthly operating income: Total sales Average contribution margin ratio Total contribution margin ($1,500,000 48%) Less: Fixed costs and expenses 18% 30% 48% $1,500,000 48% $720,000 684,000 $36,000 (3) Monthly break-even sales volume (in dollars): Fixed costs and expenses Average contribution margin ratio Break-even sales volume ($684,000 48%) $684,000 48% $1,425,000 The McGraw-Hill Companies, Inc., 2010 P20.8B PROBLEM 20.8B HOMETEAM SPORTS (concluded) d. In the new sales mix, increased sales of hats have replaced some sales of shirts. Shirts have a much higher contribution margin than hats. Thus, at a given sales volume, selling hats instead of shirts provides less contribution margin, contributes less toward operating income, and increases the sales volume required to break even. The McGraw-Hill Companies, Inc., 2010 P20.8B (p.2) SOLUTIONS TO CRITICAL THINKING CASES 20 Minutes, Medium CASE 20.1 MULTIPLE PERSPECTIVES ATTEND OUR SEMINAR The following are possible reasons you could give each of the individuals to motivate them to come to your seminar: The factory worker who serves as her companys labor union representative in charge of contract negotiations Knowledge of budgeting and budget processes is a source of empowerment in most organizations. When it comes to negotiating a labor contract, lack of budgetary knowledge can put one at a distinct disadvantage. The factorys labor union representative will be directly involved in determining one of the companys largest variable costsits direct labor. An understanding of cost-volume-profit relationships will enable her to better evaluate the impact of her wage requests on the companys performance and to better scrutinize what management says they can or cannot do. The purchasing agent in charge of ordering raw materials for a large manufacturing company The purchasing agent is also directly involved with one of the companys largest variable costs raw materials inventory. Having a general knowledge of cost-volume-profit relationships will help him to better understand the impact of his actions on company performance. For example, what is the impact on operating income of receiving large quantity discounts from a major supplier? What is the effect of receiving purchase discounts for prompt payment to all vendors? What is the effect on operating income of selecting one supplier over another? What is the net effect of paying a premium for high-quality raw materials given a resulting reduction in waste and scrap? The vice president of sales for a large automobile company The vice president of sales plays a critical role in determining her companys operating performance. A knowledge of cost-volume-profit relationships will help her to evaluate important questions related to the decisions she must make. For example, given that a target income for the company has been imposed, what sales quotas must she establish for her dealers? Or, conversely, by imposing an established sales quota on the companys dealers, what changes in operating income can be expected? Given an expected level of sales, how will fixed and variable production costs be affected? The McGraw-Hill Companies, Inc., 2010 Case 20.1 CASE 20.1 MULTIPLE PERSPECTIVES ATTEND OUR SEMINAR (concluded) The director of research and development for a pharmaceutical company Each year, the director of research and development must request budgetary funding for the development of new products. Investment in research and development represents a significant fixed cost for most pharmaceutical companies. A general understanding of costvolume-profit relationships will help the director to defend his budget request. By how much will new products increase total sales? What are the variable and fixed costs associated with bringing a new product to market? What is the effect of those costs on operating income? The McGraw-Hill Companies, Inc., 2010 Case 20.1 (p.2) 40 Minutes, Strong CASE 20.2 DONT MESS WITH THE PURPLE COW 1,500 1,282 2,782 (2) Increase Advertising Expense $14.80 6.80 $8.00 a. Sales (in gallons) required to earn $10,000 per month: Sales (in gallons) required to break even Sales (in gallons) beyond break-even point required to earn $10,000 per month, $10,000 $7.80 ($8.00 - $0.20 bonus) Sales (in gallons) required to earn $10,000 per month Projected monthly results for typical drive-in store: (1) Reduce Selling Price $12.80 6.80 $6.00 b. Average selling price per gallon Less: Variable cost per gallon Contribution margin per gallon Estimated sales (gallons): If selling price is reduced, 3,000 120% If selling price is not reduced, 3,000 110% Total contribution margin earned Less: Total fixed costs per month Additional fixed costadvertising Projected monthly operating income Monthly break-even point (in gallons): Total fixed costs per month Contribution margin per gallon Monthly break-even point (total fixed costs contribution margin per gallon) c. 3,600 $21,600 (12,000) $9,600 3,300 $26,400 (12,000) (3,000) $11,400 $12,000 $6 $15,000 $8 2,000 gallons 1,875 gallons Memo to Management: RE: Alternative marketing proposals: price reductions or additional advertising The Purple Cow should adopt neither of the two proposed marketing strategies. Of these strategies, the increased advertising would be preferable to the reductions in sales prices, as indicated by the computations of projected operating income (part b). However, neither approach is projected to achieve a higher operating income than is currently being achieved with the strategy of paying managers a bonus of 20 cents per gallon for sales in excess of the break-even point. The current profitability of a typical Purple Cow drive-in facility is summarized next. The McGraw-Hill Companies, Inc., 2010 Case 20.2 CASE 20.2 DONT MESS WITH THE PURPLE COW (concluded) Sales volume in excess of break-even point (in gallons) (3,000 gallons, less 1,500-gallon break-even point) Contribution margin per unit of sales over the break-even point ($14.80 sales price, less $6.80 variable costs, less $0.20 per gallon managers bonus) Operating income under current conditions (1,500 gallons $7.80 per gallon) 1,500 $7.80 $11,700 This amount exceeds by $300 the projected monthly operating income from the better of the two proposed new marketing strategies. The McGraw-Hill Companies, Inc., 2010 Case 20.2 (p.2) 10 Minutes, Easy CASE 20.3 SEC FORM 8-K ETHICS, FRAUD AND CORPORATE GOVERNANCE a. Section 409 of the Sarbanes-Oxley Act (SOX) requires public companies disclose certain material events within four business days after they occur. Such events include managements commitment to dispose of long-lived assets and/or terminating employees under a pension plan. SOX also requires that a firm file a Form 8-K if certain long-lived assets have become materially impaired. The charge to income that was disclosed in the Form 8-K by the CFO probably related to the impairment of the assets at the Jacksonville Plant and/or the costs associated with closing the plant. Given the company has been struggling in recent years to break-even, large charges related to asset impairments and/or plant closures would probably result in the reporting of a net loss for the year. Floyd Christensons argument is one of a desperate man. His suggestion that a Form 8-K not be filed is unjustified ethically and legally. b. c. d. The McGraw-Hill Companies, Inc., 2010 Case 20.3 5 Minutes, Easy CASE 20.4 PUMA AND NIKE BUSINESS WEEK A merger of Puma and Nike could result in a more efficient use of the assets owned by both companies. Areas of cost savings and increased economies of scale include improved distribution systems, broadened market share, better use of each companys sales force, more efficient use of research and development expenditures, improved access to raw materials, etc. The McGraw-Hill Companies, Inc., 2010 Case 20.4 35 Minutes, Medium CASE 20.5 FORD MOTOR COMPANY INTERNET a. For many years, Ford's sales mix has been concentrated in full-size pickup trucks and sports utility vehicles. For many years, these two segments have constituted nearly 60% of the company's total sales mix. For many years, sports utility vehicles have constituted the largest segment of the U.S. automobile industry's total sales mix, often constituting 20% of total vehicle sales. Historically, Ford's salex mix has remained relatively constant with full-size pickup trucks and sports utility vehicles constituting a majority of its sales. In recent years, the contribution of large and medium cars to its sales mix has declined and small car sales have increased. Historically, the U.S. automobile industry's salex mix has remained relatively constant with full-size pickup trucks and sports utility vehicles constituting over 40% of its sales. In recent years, the contribution of large size cars to the industry's sales mix has declined, and small and medium car sales have increased. With energy prices at record highs, it is likely that the industry will experience a rapid growth in its small car segment, and a significant decline in full-size pickup trucks and sports utility vehicles. b. c. d. e. Products with the highest contribution margins contribute most to the bottom line. Thus, by shifting its sales mix to include more products with high contribution margins, a company can improve its overall profitability. In the automobile industry, full-size pickup trucks and sports utility vehicles have always had higher contrubution margins than vehicles in the small car segment. As demand for smaller cars increases, the industry must find ways to manufacture these vehicles more cost effectively to avoid downturns in profitability. The McGraw-Hill Companies, Inc., 2010 Case 20.5

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HKU - ACCT - 100
CHAPTER 21 INCREMENTAL ANALYSIS 15th editionOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESBrief Exercises B. Ex. 21.1 B. Ex. 21.2 B. Ex. 21.3 B. Ex. 21.4 B. Ex. 21.5 B. Ex. 21.6 B. Ex. 21.7 B. Ex. 21.8 B. Ex. 21.9 B. Ex. 2
HKU - ACCT - 100
CHAPTER 22 RESPONSIBILITY CENTER ACCOUNTING AND TRANSFER PRICING 15th editionOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESBrief Exercises B. Ex. 22.1 B. Ex. 22.2 B. Ex. 22.3 B. Ex. 22.4 B. Ex. 22.5 B. Ex. 22.6 B. Ex. 22.7
HKU - ACCT - 100
CHAPTER 23 OPERATIONAL BUDGETING 15th editionOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESBrief Exercises B. Ex. 23.1 B. Ex. 23.2 B. Ex. 23.3 B. Ex. 23.4 B. Ex. 23.5 Topic Budgeting philosophies Cash flow at Body Builders
HKU - ACCT - 100
CHAPTER 24 STANDARD COST SYSTEMS15th edition OVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESBrief Exercises B. Ex. 24.1 B. Ex. 24.2 B. Ex. 24.3 B. Ex. 24.4 B. Ex. 24.5 B. Ex. 24.6 B. Ex. 24.7 B. Ex. 24.8 B. Ex. 24.9 B. Ex.
HKU - ACCT - 100
CHAPTER 25 REWARDING BUSINESS PERFORMANCE 15th editionOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESBrief Exercises B. Ex. 25.1 B. Ex. 25.2 B. Ex. 25.3 B. Ex. 25.4 B. Ex. 25.5 B. Ex. 25.6 B. Ex. 25.7 B. Ex. 25.8 B. Ex. 25.
HKU - ACCT - 100
15th editionBrief Exercises B. Ex. 26.1 B. Ex. 26.2 B. Ex. 26.3 B. Ex. 26.4 B. Ex. 26.5 B. Ex. 26.6 B. Ex. 26.7 B. Ex. 26.8 B. Ex. 26.9 B. Ex. 26.10CHAPTER 26 CAPITAL BUDGETINGOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASE
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
G ross Profit Sales RevenueCOGS Avg Inventory
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Gross Profit = Net Sales COGS Net Income = Gross Profit Operating ExpensesGross Profit = Net Sales COGS Net Income = Gross Profit Operating ExpensesGross Profit = Net Sales COGS Net Income = Gross Profit Operating ExpensesGross Profit = Net Sales COGS
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
e
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
Keller Graduate School of Management - FIN - 504
A /R, Cash, Inv; Current Liabilities=Acct Pay, Notes Pay, Accrued LiabCurrent Assets/Current Liabilities=Current RatioCurrent Assets-Current Liabilities=Working CapitalCredit Sales/Avg Acct Recivable=A/R Turnover Ratio 365/Acct. Recievable=Avg Collect
Belhaven - BIO - 220
Chapter 11 section 1 What type of molecules pass throught the cell membrane with greatest ease? A) Ions B) Large uncharged polar molecules C) Small uncharged polar molecules D) Hydrophobic molecules E) None of the above What drives the passive transport a
Belhaven - BIO - 220
Gynosperms No Flowers, produce seeds in cones Angisoperms Grow f lowers Monocotyledons Plants with a single seed leaf Dicotledons Plants with two seed leaves Roots Zone of cellular elongation Cell enlargement region Region of maturation Where they undergo
Belhaven - BIO - 220
H opper 1ChristopherHopper EnglishCompI Mrs.Kelly May5,2009 UncleCissy OneThanksgivingwhenIwasaroundsevenyearsoldIbelievemylifechangedforever throughmeetingoneperson.ThefamilywasgatheringatmyparentshomeforThanksgiving dinner.MyAuntCarolhadnotshowedupyeta
Belhaven - BIO - 220
Christopher Daniel Hopper 300 Forest Point Dr. Brandon, Ms 601-826-8159 Chopper@mc.edu Personal I nformation Born: April 18, 1989 Place of Bi r th: Jackson, Ms Mari tal Status: Engaged Education H istory M adison Ridgeland Academy (2007) H igh School Dipl
Belhaven - BIO - 220
Chris Hopper BIO 307 Cell and Genetics lab Dr. Reiken1. The law of independent assortment states that the alleles of two or more differentgene pair independently of each other during meiosis, such that a random combination of genes from each pair winds
Belhaven - BIO - 220
P HYLUM Hepatophyta Bryophyta Sphenophyta Pterophyta Coniferophyta No Fruit AnthophytaGENUS Marchantia Mnium Equisetum Polypodium PinusCOMMON Liverwort Moss Horesetail Fern Pine Non-Tracheophyte Non Tracheophyte Tracheophyte-Seedless Tracheophyte-Seedle
Belhaven - BIO - 220
Biology818Chapter1 BiologystudyoflifeBio=lifelogy=studyof MathphysicsChemistryBiology Typesofbiology Zoology=Studyofanimals Ichthyology=Studyoffish Ornithology=Studyofbirds Osteology=Studyofbones Histology=Studyoftissue OrganicchemistryCarbon.importantinr
Belhaven - BIO - 220
B iology 8-18 Biology- study of life B io= lifeC hapter 1logy=study ofMath physicsChemistry Biology Types of biology Zoology=Study of animals Ichthyology=Study of fish Ornithology=Study of birds Osteology=Study of bones H istology=Study of t issue Orga
Belhaven - BIO - 220
E nergy Photosynthesis formula Take home messages A natomy of a chloroplast Calvin Benson Cycle Equation of photosyntheses Primary Light source Roy g Biv Pigments Leaf changes Color P111 P113 L ight harvesting and what is going on with protein molecules t
Belhaven - BIO - 220
Christopher Hopper Dr. Angela Reiken Cell Biology Chapter 15The extracellular signal molecule used during development is called a morphogen, it diffuses out from a localized cellular source (a signaling center), generating a signal concentration gradient
Belhaven - BIO - 220
Learning and MemoryInstrumental Conditioning Report on Sniffy10/9/2009 Belhaven College Rachel Henderson1WhenIplacedSniffyonasmallvariableratioscheduleofreinforcement, heinitiallypressedthebaronceandlookedatthefooddispenserforfood.Sniffy didthissevera
Belhaven - BIO - 220
Christopher Hopper English II Mrs. Coulter November 27, 2009 Letter To Author Dear, Mrs. Oates Where Are You Going, Where Have You Been was a very well thought about and written story. This to me sounds like it was an actual experience that occurred to yo
Belhaven - BIO - 220
Christopher Daniel Hopper True Love True love is emotion and passion. True love is when two individuals see each other and never want to leave one another. True love is a feeling one feels every time he sees or thinks of his or her soul mate. I do not bel
Belhaven - BIO - 220
Mechanisms of Cell CommunicationBy Christopher Hopper, Jacob Womack, and Click to edit Master subtitle style Casey Tate4/4/11Nitric Oxide as an Intracellular Regulatoractivity of specific proteins. Functions of Nitric Oxide Relax Smooth Muscle Intra
Belhaven - BIO - 220
Christopher Hopper English Comp II Ms. Coulter December 9, 2009 Annotated Bibliography Harsh, John. Save The Rainforest. n pag. 3 June 2006. Web. 1 Oct. 2009. Save the Rainforest is a website which shares lots of details about the history of the rainfores
Belhaven - BIO - 220
Woks Cited Harsh, John. Save The Rainforest. n pag. 3 June 2006. Web. 1 Oct. 2009. Kelly, Michael. Rainforest Facts. n. pag. 22 July 2007. Web 3 Oct. 2009. Producing, Exchanging, and Distributing. 12 Sept 2009. Web. 30 Sept. 2009 Toliver, Clarence. Rainfo
Belhaven - BIO - 220
Christopher Hopper Eng 1123RC Ms. Coulter October 24, 2009 Rainforest The rainforest are being destroyed every second of every day, and something has to do be done about it. In fact according to Harsh the article Save The Rainforest, we are losing a spot
Belhaven - BIO - 220
C HRISTOPHER HOPPER RECCOMEDATION LETTER DR. REIKENI am wr i ting to you in support of Christopher Hopper and his desire to attend University Mississippi Medical Center for the Dental School program. Though many students ask me to make this request on th
Liberty - ECON - 490
Is hitting the numbers an appropriate goal, given the Chapter 1 contrast of profit and shareholder wealth maximization? It is important to exercise self-command. The question becomes what balance should we strike between self-command and risks? What risks
Liberty - ECON - 490
Why might a company use Economic Value Added (EVA) as a measure of its performance in addition to the standard measures? EVA is not a new economic or financial theory but has been adopted by business firms as an accounting practice. EVA is a variation of
Liberty - ECON - 490
Solange, Although the EVA is the preferred type of performance measurement, it too has its disadvantages. I agree with the statements you made in your discussion paper except you stating that EVA is more accurate. In reading different topics about EVA it
Liberty - ECON - 490
Stretching account payables is the postponing of payments beyond the credit period. By delaying bill payments as long as possible without damaging the firms credit, companies gets interest-free loans from suppliers (Gitman, p 550). Advantages can be conve
Liberty - ECON - 490
Solange Companies have some diplomacy on how long they take to pay their vendors. When a company is exceedingly stretching the payments to its vendors can lead to a large benefit to the operating cash flow. I agree that if a company decides to stretch the
Liberty - ECON - 490
Jill, Hitting the numbers is a normal act many corporate businesses do today. And you are absolutely right that dont make it right. You would think that the CEO would improve it business by setting goals and meeting them, but if that was the case a lot of
Liberty - ECON - 490
The American Red Cross is a non governmental, non profit making organization that is committed to saving lives and easing suffering. The American Red Cross has been around since 1881. It is a primary response organization that serves humanity and helps pe
Liberty - ECON - 490
I am going to continue to use the American Red Cross. The American Red Cross uses the concepts of finding and hiring staff, personnel policies and procedures and the standards and codes of ethics. Firing and hiring staff Finding and hiring staff starts wi
Liberty - ECON - 490
The American Red Cross is one of the most recognized charitable organizations in the U.S. and depends on volunteers and the generosity of the American public to perform humanitarian missions. It is amongst the recognized and trusted non-profit organizatio
Liberty - ECON - 490
AC505 CourseProjectPartAJamesBowers 10Nov2009A manufacturing company such as General Motors makes money by acquiring Raw Materials, converting those materials into Finished Goods, and then selling the Finished Goods to customers. To account for costs as
Liberty - ECON - 490
Subject: DB #2- Liberty University Next Post Author: Courtney Cox Posted date: Monday, July 6, 2009 8:56:47 PM EDT Last modified date: Monday, July 6, 2009 8:56:47 PM EDT Total views: 48 Your views: 1Reply Quote Set FlagI choose Liberty University as th
Liberty - ECON - 490
Managerial Finance FRL 301Formula SheetPrepared by P. SarmasCurrent Ratio =Current Assets Current LiabilitiesCash Ratio =Cash Current LiabilitiesQuick Ratio =Current Assets - Inventories Current LiabilitiesNWC Ratio =NWC Total Assets Current Ass
Liberty - ECON - 490
Corporate Finance TheoryFRL 367Formula SheetP. SarmasPV = FVPV = F(1 + R )T NPV = cos t + PVTFV = C 0 (1 + R )T NPV = C 0 + PV = FV C Rm T t (1 + R) t t =1(1 + R)T C C C FV PV = + + + + 2 T (1 + R) (1 + R) (1 + R) (1 + R)TC1 1 PV = C T R R(1 +
Liberty - ECON - 490
Evaluation of Financial Policy FRL 440Formula SheetPrepared by P. SarmasAverage Tax Rate =Tax Liability Taxable IncomeCash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders Operating Cash Flow - Net Working Capital - Net Capital S
Liberty - ECON - 490
FRL 453 Multinational Financial Management Formula Sheet(X-M) + (CI-CO) +(FI-FO) + FXB = BOPn E (CF$,t ) V = t t =1 (1 + k ) E (CF$,t ) = [ E (CF j ,t ) E ( ER j ,t )]j =1m m [ E (CF j ,t ) E ( ER j ,t )] n j =1 V = (1 + k ) t t =1 F - S * 360 * 10
Liberty - ECON - 490
Managerial Finance FRL 300Formula SheetPrepared by P. SarmasAverage Tax Rate =Tax Liability Taxable IncomeCash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders Operating Cash Flow - Net Working Capital - Net Capital Spending Cash
Liberty - ECON - 490
Gerald, National Association for the Advancement of Colored People or NAACP, an interracial membership organization, founded in 1909, has been instrumental in improving the legal, educational, and economic lives of many people. When you speak of the NAACP
Liberty - ECON - 490
Courtney, I enjoyed reading your discussion post of Women in Aviation. I really have not heard a lot about this nonprofit organization. I am sure there are more like me. I think this organization can also grow by getting the word out. The least structured
Liberty - ECON - 490
Michael I agree with the points you made on your discussion board post. It is important for any organization to have a good leader and good ethical standards. Finding an effective leader can be demanding especially one with high ethical and moral standard
Liberty - ECON - 490
Mr. Alvey You discussion post was very informative. I have never heard of Promise Keepers. I see that they have been around since 1990. I think going international is step this organization should take. The first step to going international is to develop