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Mark knows that if he can reduce the ﬁxed costs in his proposal, then the break-even point will
be reduced to a level that top management ﬁnds acceptable. Working with a friend in the company’s
ﬁnance department, Mark ﬁnds ways to credibly misstate the estimated ﬁxed costs of producing
DNA-diamonds below those that any objective person would estimate.
Mark knows that if the product is successful (and he is C H A P that R S I be), Pthen top mancertain T E it will N
agement will not ﬁnd out about the understatement of ﬁxed costs. Mark believes that this product,
once it is successful, will beneﬁt the shareholders and employees of the company. 1 (L.O. 1) Making Yourself Successful in College 2 Approaching College Reading and 3 Required
Are Mark’s actions ethical? Explain. Approaching College Assignments:
Following Directions 3-24. Basic Decision Analysis Using CVP
Developing a College-Level Vocabulary
Cambridge, Inc., is considering the introduction of a new calculator with the following price and
Sales price . . . . . . . . . . . . . $
Variable costs . . . . . . . . Reading Textbooks and
Fixed costs . . . . . . . . . . . . . . . .
20,000 per month Required
a. What number must Cambridge sell per month to break even?
b. What number must Cambridge sell to make an operating proﬁt of $16,000 for the month?
(L.O. 1) ✓ Related Resources 3-25. Basic Decision Analysis Using CVP
See pages 000 to 000
Refer to the data for Cambridge, Inc., in Exercise 3-24. Assume that the projected number of units
of the Annotated Instructor’s
sold for the year is 7,000. Consider requirements (b), (c), and (d) independently of each other.
Edition for general sugges- Required
tions related to the chapters
in Part One.
a. What will the operating proﬁt be?
b. What is the impact on operating proﬁt if the sales price decreases by 10 percent? Increases by
c. What is the impact on operating proﬁt if variable costs per unit decrease by 10 percent? Increase by 20 percent?
d. Suppose that ﬁxed costs for the year are 10 percent lower than projected, and variable costs per
unit are 10 percent higher than projected. What impact will these cost changes have on operating proﬁt for the year? Will proﬁt go up? Down? By how much?
10/5/09 11:09:29 PM lan27114_ch03_080-109.indd 98 10/22/09 10:34:03 PM REVISED PAGES Chapter 3 Fundamentals of Cost-Volume-Profit Analysis 1 3-26. Basic Decision Analysis Using CVP
P with T
Balance, Inc., is considering the introduction of a new energy snackA R the following price and
Sales price . . . . . . . . . . .
Variable costs . . . . . . . . .
Fixed costs . . . . . . . . . . . $ 1.00 per unit
0.20 per unit
400,000 per month 99 (L.O. 1) Orientation Required
a. What number must Balance sell per month to break even?
b. What number must Balance sell per month to make an operating proﬁt of $100,000? 3-27. Basic Decision Analysis Using CVP
Preparing and 700,000
Refer to the data for Balance, Inc., i...
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- Spring '07