222 CH 6 HW Solutions 5th edition

222 CH 6 HW Solutions 5th edition - CHAPTER 6...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 6 Cost-Volume-Profit Analysis: Additional Issues Homework Solutions ANSWERS TO QUESTIONS (8, 14) 8. The 100,000-mile tire has a higher unit contribution margin, that is, each tire sold covers a larger amount of fixed costs. Therefore, if the sales mix shifts away from the 100,000-mile tire to the 40,000-mile tire, the company will have to sell more total tires in order to break-even. 14. Typically manual labor is considered a variable cost. Depreciation on factory equipment is a fixed cost. Therefore, if a company replaces manual labor with automated factory equipment it will increase its operating leverage, and increase its break-even point. SOLUTIONS TO BRIEF EXERCISES (1, 10, 11, 14, 15) BRIEF EXERCISE 6-1 1. (a) $80 = ($250 – $170) (b) 32% ($80 ÷ $250) 2. (c) $300 = ($500 – $200) (d) 40% ($200 ÷ $500) 3. (e) $1,000 = ($300 ÷ 30%) (f) $700 ($1,000 – $300) BRIEF EXERCISE 6-10 (a) Sales Mix Bedroom Division $500,000 ÷ $1,250,000 = .40 Dining Room Division $750,000 ÷ $1,250,000 = .60 (b) Weight-average contribution = $550,000 = .44 margin ratio $1,250,000 OR Contribution Margin Ratio Bedroom Division ($250,000 ÷ $500,000) = .50 Dining Room Division ($300,000 ÷ $750,000) = .40 Weighted-average contribution margin ratio = (.50 X .40) + (.40 X .60) = .44
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
BRIEF EXERCISE 6-11 Product A Product B Contribution margin per unit (a) Machine hours required (b) Contribution margin per unit of limited resource [(a) ÷ (b)] $10 .0 2 $ 5 $12 3 $ 4 BRIEF EXERCISE 6-14 Degree of operating leverage = Contribution margin ÷ Net income Dousmann Corp. 1.4 = Contribution margin ÷ $50,000 Contribution margin = $50,000 X 1.4 = $70,000 PCB Co. 5.6 = Contribution margin ÷ $50,000 Contribution margin = $50,000 X 5.6 = $280,000 BRIEF EXERCISE 6-15 Product 1 Product 2 Contribution margin per unit (a) Machine hours required (b) Contribution margin per unit of limited resource [(a) ÷ (b)] $ 42 .14 $300
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/17/2012 for the course ACT 222 taught by Professor Pike during the Fall '10 term at Saint Louis.

Page1 / 8

222 CH 6 HW Solutions 5th edition - CHAPTER 6...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online