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examchap6 - Folk Exam Questions - Chapter 6 1. A company...

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Folk Exam Questions - Chapter 6 1. A company has provided the following data: Sales 12,000 units Sales price $100 per unit Variable cost $50 per unit Fixed cost $300,000 If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, by how much will net income increase? Solution: Current Change Revised Sales (12,000 x $100) $1,200,000 Less variable expenses (12,000 x $50) 600,000 Contribution margin 600,000 $ 60,000 (1) $660,000 Less fixed expenses 300,000 (60,000 ) (2) 240,000 Net income $ 300,000 $120,000 $420,000 (1) $600,000 x 10% = $60,000 (2) $300,000 x 20% = $60,000 2. Hamada Company sells a single product. The product has a selling price of $100 per unit and variable expenses of 80% of sales. If the company's fixed expenses total $150,000 per year, what will the break-even be? Solution: The contribution margin (CM) percentage may be calculated as: Sales percentage (100%) minus Variable expenses percentage equals CM percentage
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This note was uploaded on 04/06/2012 for the course 10 275 taught by Professor Sahay during the Summer '11 term at Rutgers.

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examchap6 - Folk Exam Questions - Chapter 6 1. A company...

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