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Chapter 19 partial from powerpoint

Chapter 19 partial from powerpoint - New Contribution...

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Chapter 19 CVP is so important, management often wants the information reported in a special format income statement In its early stages of operation, a company’s primary goal is to break-even. Failure to break-even will eventually lead to financial failure. Once a company achieves break-even sales, a sales goal can be set that will result in a target net income. Assuming Vargo’s target net income is $250,000, required sales in units and dollars to achieve this are Assuming Vargo’s sales are $800,000: Basic Data Should Vargo Video match a competitor’s 10% discount and reduce selling price to $450 per unit? News Sales Price [$500 - (.10 × $500)] = $450.
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Unformatted text preview: New Contribution Margin ($450 - $300) = $150 • Should Vargo Video match a competitor’s 10% discount and reduce selling price to $450 per unit? Management must decide how likely it is that Vargo can achieve the increase in sales as well as the likelihood of lost sales if the discount is not matched • Use of new equipment is being considered that will increase fixed costs by 30% and lower variable costs by 30%. What effect will the new equipment have on the sales required to break-even? Fixed costs will increase $60,000 and variable costs will decrease $90,000 (variable cost per unit = $210)...
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