chapter_3

Mark believes that this product once it is successful

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Unformatted text preview: of its high break-even point. 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 ART ONE 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 cost characteristics: Sales price . . . . . . . . . . . . . $ 18 each Variable costs . . . . . . . . Reading Textbooks and ... 10 each 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 20 percent? 1 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? cor50782_ch01_001-072.indd 1 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 cost characteristics: 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 (L.O. 1) Preparing and 700,000 Refer to the data for Balance, Inc., i...
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