Unformatted text preview: n Exercise 326. Assume that the company plans to sell Organizing Yourself
units per month. Consider requirements (b), (c), and (d) independently of each other. for Success in College Required
a. What will be the operating proﬁt?
b. What is the impact on operating proﬁt if the sales price decreases by 10 percent? Increases by
20 percent?
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?
328. Analysis of Cost Structure
(L.O. 2)
The Dollar Store’s cost structure is dominated by variable costs with a contribution A P T E R S I N P A R T O N
C H margin ratio
of .30 and ﬁxed costs of $30,000. Every dollar of sales contributes 30 cents toward ﬁxed costs and
proﬁt. The cost structure of a competitor, OneMart, is dominated by ﬁxed costs with a higher con1 of sales contributes Successful in College
tribution margin ratio of .80 and ﬁxed costs of $280,000. Every dollar Making Yourself80 cents
toward ﬁxed costs and proﬁt. Both companies have sales of $500,000 for the month. E 2 Approaching College Reading and
Required
Developing a CollegeLevel Vocabulary
a. Compare the two companies’ cost structures using the format shown in Exhibit 3.5.
b. Suppose that both companies experience a 15 percent increase in sales volume. By how much
would each company’s proﬁts increase?
3 Approaching College Assignments:
Reading Textbooks and Following Directions
(L.O. 2) 329. Analysis of Cost Structure
Foxx Company’s cost structure is dominated by variable costs with a contribution margin ratio of
.25 and ﬁxed costs of $100,000. Every dollar of sales contributes 25 cents toward ﬁxed costs and
proﬁt. The cost structure of a competitor, Beyonce, Inc., is dominated by ﬁxed costs with a higher
contribution margin ratio of .80 and ﬁxed costs of $400,000. Every dollar of sales contributes
80 cents toward ﬁxed costs and proﬁt. Both companies have sales of $600,000 per month. Required
a. Compare the two companies’ cost structures using the format shown in Exhibit 3.5.
b. Suppose that both companies experience a 20 percent increase in sales volume. By how much
would each company’s proﬁts increase?
330. CVP and Margin of Safety
Rainbow Tours gives walking tours of Springﬁeld. Rainbow charges $40 per person for the tour
and incurs $16 in variable costs for labor, drinks, and maps. The monthly ﬁxed costs for Rainbow
Tours are $3,600.
Required
a. How many tours must Rainbow sell every month to break even?
b. Rainbow Tours’s owner believes that 175 people a month will sign up for the walking tour.
What is the margin
cor50782_ch01_001072.indd 1 of safety in terms of the number of people signing up for the tour? lan27114_ch03_080109.indd 99 ✓ Rela...
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 Spring '07
 MEJIAS
 Contribution Margin, CVP analysis

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