201-SELF STUDY PROB-WEEK 7-S'12

201-SELF STUDY PROB-WEEK 7-S'12 - !"# %...

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Unformatted text preview: !"# % &'() &*+,- ./01('2& 3 &0(+*405& 3 6''7 8 8%!"9 8%!:9 8%!89 8%!;9 8%<= .>?@ABC 8%!" DEBFGH?I J@?EG KHLLB>BIG M?CNJIHBF OHGP FJCB )Q JIK RQ 7-20 The low-price company must have a larger sales volume than the high-price company. By spreading its fixed expense across a larger sales volume, the low-price firm can afford to charge a lower price and still earn the same profit as the high-price company. Suppose, for example, that companies A and B have the following expenses, sales prices, sales volumes, and profits. Company A Company B Sales revenue: 350 units at $10 ............................................... 100 units at $20 ............................................... Variable expenses: 350 units at $6 ................................................. 100 units at $6 ................................................. Contribution margin ............................................. Fixed expenses ..................................................... Profit ...................................................................... $3,500 2,100 $1,400 1,000 $ 400 $2,000 600 $1,400 1,000 $ 400 .>?@ABC 8%!: ,>JO QR. S>JNP JIK M?CNEGB @>BJT%BUBI EXERCISE 7-26 (25 MINUTES) 1. Cost-volume-profit graph: Break-even point: 20,000 tickets Total revenue Total expenses Variable expense (at 30,000 tickets) Annual fixed expenses Tickets sold per year 5,000 10,000 15,000 20,000 25,000 30,000 Dollars per year $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 Profit area Loss area EXERCISE 7-26 (CONTINUED)...
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201-SELF STUDY PROB-WEEK 7-S'12 - !"# %...

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