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answer in BA Case - the variable cost The average...

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1. Assumptions: The average contribution margin to cover the total fixed cost of the three product lines has negligible difference if you take the individual contribution margin of each product. 2. A. 720,000 + 2970000 = 3690000 3690000/(7.20-4.5) = 1366666.667 3. 4. Breakeven A = = = 384, 000 Breakeven B = = = 297, 142.8571 Breakeven C = = = 500, 000 Total Breakeven 1, 181, 142.8571 The sum of the three breakeven volumes is not equal to 1,100,000 units aggregated break- even volume. From the formula breakeven = the contribution margin is inversely proportional to the breakeven volume. The computation of contribution margin comes from the difference between the selling price and
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Unformatted text preview: the variable cost. The average contribution margin will be slightly different with the separate contribution margins of each product because of the rounding off factor. 5. This type of analysis is vital for testing if the result remains the same when certain variables are altered. Certain assumptions are made on Bill French’s first computations. In reality, the company’s decisions changes and this change brings about different result. Therefore, performing sensitivity analysis on important variables is very vital in company’s decision making processes....
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