Answer and Explanation:
1. The computation of the unit sales is shown below:
As we know that
Unit sales to attain the desired profit is
= (Fixed cost + desired profit) ÷ contribution margin per unit
= ($32,250 + $8,000) ÷ ($140 - $70)
= 575 units
2. And, the units sales is
Before this first determine the contribution margin ratio which is
Contribution margin ratio = Contribution margin ÷ sales × 100
= $70 ÷ $140 × 100
= 50%
now the dollar sales is
= (Fixed cost + desired profit) ÷ contribution margin ratio
= ($32,250 + $8,700) ÷ 50%
= $81,900
The unit sales is 575 units and dollar sales is $81,900.
Given that,
Selling price of single product is $140.Variable expense per unit is $70.Monthly fixed expense is $32,250.1. Unit sales to attain target profit of $8,000.
Unit sales = ($32,250 + $8,000) [tex]\div[/tex] ($140 - $70)
= 575 units
2. Dollar sales to attain target profit of $8,700.
Dollar sales = (Fixed cost + Profit) [tex]\div[/tex] Contribution Margin Ratio
= [[tex]($32,250 + 8,700)[/tex] [tex]\div[/tex] ([tex]70[/tex][tex]\div[/tex][tex]\frac{140}{100}[/tex])]
= $81,900
Learn more: https://brainly.com/question/15967143
What type of product modification is likely to make the greatest impact on a food product?
A) Quantity
B) Aesthetic
C) Functional
D) Versatility
E) Texture.
Answer: Aesthetic
Explanation:
The type of product modification that is likely to make the greatest impact on a food product is aesthetic.
Product Modification simply means the improvement of an existing products in such a way that necessary changes are made to the product's nature, size, color, characteristics, nature, packing etc. in order to meet consumers demand. Aesthetic in food products will help the product stand out and beautify it.
The number of taxicabs in Motorville and the taxicab fares are regulated. The fare currently charged is Rs.500 a ride. Motorville taxicab drivers want to obtain government's permission to raise the fare to increase their revenues and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for taxicab rides:
Price (Rupees per ride) Quantity demanded (rides per month)
300 160
400 120
500 80
600 40
700 0
(i) Calculate the price elasticity of demand for taxicab rides as the fare rises from Rs.500 to Rs.600. Is the demand price elastic or inelastic for this fare rise? (2 Marks)
(ii) What happens to the taxicab drivers' total revenue if the fare rises from Rs.500 to Rs.600? How can you use your answers in part “a” to answer this question? Should the drivers try to obtain permission to raise the fare? (2 Marks)
(iii) Calculate the price elasticity of demand for taxicab rides as the fare falls from Rs.500 to Rs.400. Is the demand price elastic or inelastic for this fare decrease?
Answer:
The answer is below
Explanation:
i) The price elasticity of demand is given by the formula:
[tex]Price \ elasticity\ of \ demand=\frac{\Delta Q}{\Delta P} =\frac{\frac{Q_2-Q_1}{(Q_2+Q_1)/2} }{\frac{P_2-P_1}{(P_2+P_1)/2} } \\\\Price \ elasticity\ of \ demand=\frac{\frac{40-80}{(40+80)/2} }{\frac{600-500}{(600+500)/2} }=\frac{-2/3}{2/11} =3.667 (ignore \ the\ sign)[/tex]
Since the price elasticity of demand is greater than 1 hence it is elastic
ii) Since the price elasticity of demand is elastic as a result of increase in fare, hence the total revenue would decrease.
iii)
[tex]Price \ elasticity\ of \ demand=\frac{\Delta Q}{\Delta P} =\frac{\frac{Q_2-Q_1}{(Q_2+Q_1)/2} }{\frac{P_2-P_1}{(P_2+P_1)/2} } \\\\Price \ elasticity\ of \ demand=\frac{\frac{120-80}{(120+80)/2} }{\frac{400-500}{(400+500)/2} }=\frac{0.4}{-2/9} =1.8 (ignore \ the\ sign)[/tex]
Since the price elasticity of demand is greater than 1 hence it is elastic
ou manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the reward-to-volatility (Sharpe) ratio for the equity fund
Answer:
Reward to volatility ratio = 0.71
Explanation:
Given the expected risk premium = 10%
Standard deviation = 14%
The rate on treasury bills = 6%
The investment amount that the client chooses to invest = $60000
Expected return of equity = the expected risk premium + The rate on treasury bills
Expected return of equity = 10% + 6% = 16%
Standard deviatin = 14%
Reward to volatility ratio = (expected return - risk free rate) /standard deviation
Reward to voltality ratio = (16% -6%)/14%
Reward to voltality ratio = 0.71
What is Neeley Grocery's operating leverage factor at the target level of operating income?
A. 1.60.
B. 0.63.
C. 2.67.
D. 0.40.
Answer:
A. 1.60
Explanation:
For computation of operating leverage factor first we need to determine the required contribution which is shown below:-
Required Contribution = Target Profit + Fixed Cost
= $25,000 + $15,000
= $40,000
Operating Leverage Factor = Contribution ÷ Operating Income
= $40,000 ÷ $25,000
= $1.60
Therefore for computing the operating leverage factor we simply applied the above formula.
Last year, Bad Tattoo Co. had additions to retained earnings of $4,780 on sales of $95,560. The company had costs of $75,720, dividends of $2,980, and interest expense of $2,040. If the tax rate was 34 percent, what the depreciation expense?
a. $6,439.
b. $13,285.
c. $7,390.
d. $7,760.
e. $6,042.
Answer:
e. $6,042
Explanation:
Net income of Bad tattoo co. = Addition of retained earnings + Dividends
= $4,780 + $2,980
= $7,760
Income before tax of Bad tattoo Co = Net income / (1-tax rate)
= $7,760 / (1-34%)
= $7,760 / 0.66
= $11,758
But,
Income before tax = Sales - Costs
- Depreciation expense - Interest expense
$11,758 = $95,560 - $75,720 - Depreciation expense - $2,040
$11,758 = $19,840 - Depreciation expense - $2,040
Depreciation expense = $19,840 - $11,758 - $2,040
Depreciation expense = $6,042
Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $4.00. The smallest amount for which you would be willing to wash someone else's car is $2.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it
Answer:
Economic surplus is $1.5
Explanation:
Economic surplus considers two components. The consumer surplus and the producer surplus.
Consumer surplus is difference between what a consumer is willing to pay and the market price of a good.
Producer surplus is the difference between the market price of a good and the minimum amount seller is willing to recieve for the product.
In this instance economic surplus combines the benefits that a producer and supplier gets from the product.
Consumer surplus is $4 and the producer surplus is $2.50
So if one decides to wash the car the comic surplus will be 4 - 2.50 = $1.5
Answer: $1.50
Explanation:
The economic surplus is the benefit that a person receives over what they view as the cost of the transaction.
Here you believe the car wash is worth $4.00 yet you believe the cost would be $2.50 if you did it yourself.
The surplus you are gaining therefore is;
= 4 - 2.50
= $1.50
Laura and Bryce both want to be able to forward receipts to QuickBooks Online to take advantage of the Receipt Capture feature. Where would they go to enable an additional email account for the same QuickBooks Online company? Gear > Tools > Manage Receipt Capture emails Banking > Receipts > Manage Senders Banking > Receipts > Manage Receipt Capture emails Gear > Account and Settings > Advanced > Manage Senders
Answer:
Banking > Receipts > Manage Senders> Image capture
Explanation:
For taking advantage with respect to the capital feature of receipts the following procedure is applied and for enabling an extra email account the same is considered
In the column of manage, senders enter the new mail
Also, one company mail is restricted in QuickBooks online
Now if the extra email is needed to use the field of customer-facing in the column of sales form
This should be followed
A study examining the performance of numerous assets from the United States and around the world confirms that a. U.S. equities are highly correlated with world government bonds and with the commodities index. b. most assets (including common stocks) have positive correlations with inflation. c. riskier assets with lower standard deviations experienced higher returns. d. beta did a better job of explaining the returns than standard deviation. e. riskier assets with higher standard deviations experienced lower returns.
Answer:
d. beta did a better job of explaining the returns than standard deviation
Explanation:
Beta measures the systemic risk associated with the particular investment, it do not compute the total risk associated, which is more logical.
Standard deviation computes the total risk associated.
Some risk is natural, like the risk of floods, natural calamities, earthquake, etc:
That risk shall not counted as for comparison as that is associated universally. Further, the risk associated with particular factors like bankruptcy of a company, or some legal case issue of a company are precisely described by beta coefficient.
Thus, beta provides better details about explaining the returns.
The two main sources for the supply of capital in the u.s. economy are:__________
Answer and Explanation:
The two significant sources for the capital supply in the u.s economy are as follows
1. Savings done by the individual and the firms that known as S
2. Financial capital inflow arise from the investors in foreign countries i.e. equivalent to the trade deficit M-X
Or Imports minus exports
These two are to be considered
Many checking accounts offer multiple ways of accessing money in addition to checks. Which of these can be used to access money in a checking account? A) debit card B) credit card C) certificate of deposit D) passbook
Answer:
A, debit card
Explanation:
The correct option is A.
The following information regarding the debit card is:
The debit card is the card where the funds for the amount with respect to the purchased should be considered for the checking account. By this we can do shopping, travelling, etc.The products should be purchased to the maximum balance mentioned in the account.Learn more: brainly.com/question/17429689
Jackie is often surprised when she goes to other countries to learn that people do business so differently. For instance, in meetings Jackie is used to getting straight to the point and addressing any relevant issues. However, she has learned that in many countries businesspeople take the time to first make small talk and ask about the family before finally getting down to business. To Jackie this seems to make the meetings unnecessarily long and wastes valuable time. These cultural differences seem strange to Jackie because she is relying on her:________ a. self-reference principle b. international bias c. self-reference criterion d. cultural relativism e. ethical perspectives
Answer:
Self reference criterion ( C )
Explanation:
The cultural differences seem strange to Jackie because she is relying on her self reference criterion
self reference criterion is the influence one's culture will have on the person when the person is exposed to a situation that is suppose to portray the culture the person is used to, but the situation portrays a different culture, hence based on her cultural values and experience she believes that small talks makes the meeting unnecessarily long
Beans Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $162,000, variable manufacturing overhead of $2.80 per direct labor-hour, and 60,000 direct labor-hours. Recently, Job K818 was completed with the following characteristics: Number of units in the job 10 Total direct labor-hours 50 Direct materials $ 920 Direct labor cost $ 1,400 The total job cost for Job K818 is closest to:
Answer:
Total cost= $2,595
Explanation:
Giving the following information:
Estimated fixed manufacturing overhead cost= $162,000
Variable manufacturing overhead of $2.80 per direct labor-hour
Estimated direct labor hours= 60,000
Job K818:
Number of units in the job 10
Total direct labor-hours 50
Direct materials $920
Direct labor cost $1,400
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (162,000/60,000) + 2.8
Predetermined manufacturing overhead rate= $5.5
Now, we can calculate the total cost for Job K818:
Total cost= direct material + direct labor + allocated overhead
Total cost= 920 + 1,400 + 5.5*50
Total cost= $2,595
The founders of "Black Lives Matter" would be consider
according to your textbook.
1)Social activists
2)justice Warriors
3)Social warriors
4)Social entreprenures
Answer:
4)Social entreprenurers
Prepare a statement of cash flows for MED Corporation. (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.) Cash flow from Operating Activities $ Cash flow from Investing Activities $ Cash flow from Financing Activities $ Net Change in Cash and marketable securities $
Answer:
Explanation:
Question
Prepare a statement of cash flows for MED Corporation. (Enter your answers in thousands. Amounts to be deducted should be indicated with a minus sign.) Cash flow from Operating Activities $ Cash flow from Investing Activities $ Cash flow from Financing Activities $ Net Change in Cash and marketable securities $
Consider two perfectly negatively correlated risky securities, K and L. K has an expected rate of return of 12% and a standard deviation of 17%. L has an expected rate of return of 9% and a standard deviation of 11%. The risk-free portfolio that can be formed with the two securities will earn _____ rate of return.
Answer:
We need the compute the weight of K and L
Weight of K = Standard deviation of security L / Standard deviation of security K + Standard deviation of security L
Weight of K = 11% / 17% + 11%
Weight of K = 11% / 28%
Weight of K = 0.39286
Hence, the weight of security K is 0.39286
Weight of L = Standard deviation of security K / Standard deviation of security L + Standard deviation of security K
Weight of L = 17% / 11% + 17%
Weight of L = 17% / 28%
Weight of L = 0.607143
Hence, the weight of security L is 0.607143
Now we compute the rate of return risk-free portfolio as follow:
Return of portfolio = [Return of K * Weight of K] + [Return of L * Weight of L]
Return of portfolio = [12% * 0.39286] + [9% * 0.607143]
Return of portfolio = 0.0471432 + 0.05464287
Return of portfolio = 0.10178607
Return of portfolio = 10.18%
Hence, the rate of return of risk-free portfolio is 10.18%
If the level of productivity increases, then:___________A. The marginal cost curve shifts upward.B. Market price increases.C. The marginal cost curve shifts downward.D. The firm will supply less output.
Answer: C. The marginal cost curve shifts downward.
Explanation:
The level of productivity increasing means that the company is now goods per input which means that they are now more efficient at producing goods and services.
More efficiency in a company will mean that the company is spending less per input so its costs will reflect this. With marginal cost showing the effect per additional unit, this reduction in cost will be reflected by a shift downward in the Marginal cost curve.
Which is not an example of an intangible products? 1) Music downloads 2) t-shirt 3) online video game 4) software
Answer:
The second option, a t-shirt.
Explanation:
Tangible means something that is "perceptible by touch."
If you can touch something and feel it, it's tangible.
Answer:
[tex]\boxed {\tt 2. \ T-shirt}[/tex]
Explanation:
This question asks us which is not an example of an intangible product. We need to find the object that is tangible. Let's define the words and examine our answer choices.
A tangible product is a physical object that can be touched, while an intangible product is a product that cannot be touched.
Music downloads, online video games, and software are all intangible. They cannot be touched, as they are all virtual.
A t-shirt is a tangible product that can be touched.
Therefore, the correct answer is 2. T-shirt
Why does insurance often provide "peace of mind"? O People know their insurance coverage will help prevent accidents and damage O People trust that they will make a profit if they pay insurance premiums. O People are not concerned about their health if they can pay for doctor's visits. 0 People are less worried when they know they have protection from risk.
Answer: D.) People are less worried when they know they have protection from risk.
Explanation:
The reason why insurance provided peace of mind is because people are less worried when they know they have protection from risk.
What is insurance?Insurance is when a third-party (the insurer) promises to idenmify another party (the insured) for losses they might suffer in the future in exchange for agreed upon payments.
For example, a person might insure his car against theif. Thi makes the inusred less worried about her car getting stolen.
To learn more about insurance, please check: https://brainly.com/question/1400638
Lorenzo Company applies overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following. Work in Process Inventory Date ExplanationDebit Credit Balance Dec.31 Direct materials cost1,900,000 1,900,000 31 Direct labor cost210,000 2,110,000 31 Overhead applied684,000 2,794,000 31 To finished goods 2,723,000 71,000 1. Determine the predetermined overhead rate used (based on direct materials cost). 2. Only one job remained in work in process inventory at December 31. Its direct materials cost is $22,000. How much direct labor cost and overhead cost are assigned to this job
Answer:
1. Overhead rate = Overhead costs / Direct material costs
Overhead rate = $684,000 / $1,900,000
Overhead rate = 0.36
Overhead rate = 36%
2. How much direct labor cost and overhead cost are assigned to this job?
Total cost of job in process $71,000
Less: Overhead applied $7,920
($22,000 * 36%)
Less: Material cost of job in process $22,000
Direct labor cost $41,080
Hence, direct labor cost is $41,080 and Overhead cost is $7,920
There are many different workplaces in the Architecture and
Construction career cluster. Select the workplaces that
sound most interesting or enjoyable to you.
A. a highway, road, or bridge
B. a large construction site
C. a home being remodeled
D. an office
E. the nonpublic areas of a large building
Answer:
It's choose your own answer so you pick it they're no wrong answers
Explanation:
The workplaces that are interesting to me in the Architecture and Construction career cluster are: C. a home being remodeled and E. the nonpublic areas of a large building.
The architecture and construction career cluster designs, plans, and constructs physical structures with aesthetic appeals and engineering considerations.
Some workers in this career cluster specialize in designing and constructing residential and commercial buildings. Others engage in landscaping, interior, green, and urban planning and designs. Some specialize in industrial designs and constructions.
Thus, I enjoy remodeling homes and private areas of public buildings because they must exhibit human touch and sensibilities.
Learn more about Architecture and Construction careers at https://brainly.com/question/17261930
In the month of November, Terpak Industries had the following overhead costs. 1. Property taxes, $22,500 ($10,000 for offices, $12,500 for factory) 2. Insurance, $14,380 ($3,140 for office building insurance, $7,240 for accidental injury insurance on factory workers, $4,000 for factory building insurance) 3. Utilities, $1,843 ($1,200 for factory, $643 for offices) 4. Depreciation, $47,000 ($15,400 for factory equipment, $19,000 for factory building, $12,600 for office building) How much will Terpak debit their Manufacturing Overhead account on November 30
Answer:
The amount Terpak will debit their Manufacturing Overhead account on November 30 is $59,340.
Explanation:
Manufacturing overhead can be described as all indirect costs that are incurred by a firm during the production process.
Manufacturing overhead is also known as factory overhead and it can be calculated by considering all the costs related to the factory.
For this question, the amount Terpak will debit their Manufacturing Overhead account on November 30 can therefore be calculated as follows:
Particulars Amount ($)
Factory tax 12,500
Factory accidental injury insurance 7,240
Factory building insurance 4,000
Factory utilities 1,200
Depreciation of factory equipment 15,400
Depreciation of factory building 19,000
Total manufacturing overhead 59,340
Therefore, the amount Terpak will debit their Manufacturing Overhead account on November 30 is $59,340.
Wiggins Company has 2,000 shares of $100 par preferred stock, which were issued at par. It also has 35,000 shares of common stock outstanding, and its total stockholders' equity equals $795,000. The book value per common share is:________
a) $16.08.
b) $2271.
c) $21.49.
d) $100.00.
e) $17.00.
Answer:
e) $17.00 shares
Explanation:
Calculation for the book value per common share
First step is to calculate for the Preferred stock claim
Using this formula
Preferred stock claim= Company shares × Par preferred stock
Let plug in the formula
Preferred stock claim= 2,000 shares x $100 par share
Preferred stock claim= $200,000
Second step is to calculate for the Book value per common share using this formula
Book value per common share=(Total stockholders' equity-Preferred stock claim)/Common stock outstanding shares
Let plug in the formula
Book value per common share=($795,000 - $200,000)/35,000 shares = $16 share
Book value per common share=$595,000/35,000 shares
Book value per common share= $17.00 shares
Therefore the book value per common share will be $17 shares
Which programs or projects are most likely funded by taxes paid by the citizens of the United States? Select three options.
constructing a highway
public school funding
developing a vacation resort
building of private homes
maintaining state parks
Answer:
constructing a highway public school fundingmaintaining state parksExplanation:
The projects and programs funded by taxes of the United States includes social security, national security, medicare, social services, etc.
The three programs that's been listed in the options given above, that are funded by taxes paid by the citizens of the United States are:
Constructing a Highway: Highway is an important mode of transportation, thus the government pay taxes to construct highways and roadways. The government cares about the public infrastructures.Public School Funding: Public School Funding is another program that if funded by taxes by the government. The government is concerned about the future of youth and new generation, thus they invest in the future of the country.Last but not the least, maintaing state parks: Maintenance of state parks is another program funded by the government. State parks are the place that attracts tourism and many people love to go to parks thus for the welfare of public the government funds for the maintenance of state parks.Thus the correct options are constructing a highway , public school funding, and maintaining state parks.
Which programs or projects are most likely funded by taxes paid by the citizens of the United States? Select three options.
constructing a highway
public school funding
developing a vacation resort
building of private homes
maintaining state parks
Mize Company provided $45,500 of services on account, and collected $38,000 from customers during the year. The company also incurred $37,000 of expenses on account, and paid $32,400 against its payables. How do these events impact the elements of the horizontal financial statements model
Answer:
Total asset will increase
Explanation:
Equity and Liability Amount Effect
Service Revenue $45,500
Expenses $37,000
Profit $8,500 Increase in equity
Account Payable $4,000 Increase in liability
($37,000 - $32,400)
Total $13,100 Increase in Total assets
Asset
Cash $5,600
($38,000 - $32,400)
Account Receivables $7,500
($45,500 - $38,000)
Total $13,100 Increase in Total assets
Last year, Michelson Manufacturing reported $10,250 of sales, $3,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds outstanding that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 21%. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $725. By how much will the depreciation change cause the firm's net after-tax income and its net cash flow to change
Answer and Explanation:
The computation is shown below:
Particulars Last year Current year
Sales $10,250 $10,250
Operating cost -$3,500 -$3,500
Operating income $6,750 $6,750
less:
Interest expense
(6.5% of 3,500) -$227.50 -$227.50
depreciation expense -$1,250 -$1,975 ($1,250 + $725)
Earning before tax $5,272.50 $4,547.50
Less: Income tax
at 21% -$1,107.23 -$954.98
Net income $4,165.27 $3,592.53
Now the net cash flow is
Net income $4,165.27 $3,592.53
Add:
Depreciation $1,250 $1,975
Total net cash flows $5,145.27 $5,567.53
Change is $422.26
Use your understanding of ethics to complete the sentence.
When managers use environmental and social impacts as criteria in all their decision making,
their philosophy
is an important part of
____
Answer: d. sustainability
Explanation:
Sustainability refers to the maintenance of resources such that they can be used in perpetuity.
When managers use environmental and social impacts as criteria in all their decision making, this is an important part of sustainability because they will be able to see how their actions affect the environment and thus adjust these actions in order to achieve sustainability of the resources we have on Earth.
A deposit of $1000 at 4% interest compounded continuously will grow to v(t) = 1000 e^0.04 dollars after t year. Find the average value during the first 40 years (that is, from time 0 to time 40.)
Answer: 20,816.215
Explanation:
Given that:
A deposit of $1000 at 4% interest compounding is defined by the growth function:
v(t) = 1000e^0.04t
Where t = number of years.
Find the average value during the first 40 years (that is, from time 0 to time 40.)
(That is t = 0,...,40)
For ease, we can use a python list comprehension to get our values.
v = [1000*2.7182818**0.04*t for t in range(41)]
V gives a list of the value of the deposit from year 0 till 40 years after the deposit.
Average = sum of compounding deposits / number of years
Sum of compounding deposits = sum(v) = $853464.8344
Number of years = len(v) = 41
Hence, average = $853464.8344 / 41
Average = $20,816.215
All of the following are functions of packaging except:____________.
A) consumer convenience.
B) product protection.
C) entertainment.
D) promotion.
E) added benefits.
Answer:
C. Entertainment
Explanation:
When goods are produced or manufactured, they are usually sealed or placed in containers/boxes, depending on the nature or how big those goods are. Ideally, packaging serves a means of protecting goods from damage. However, packaging also help to facilitate product storage and convenience.
Furthermore, packaging a product could also serve as a means of promoting it by branding the cover either through the producer's logo or any item that will be identified with the producer. There is also the aspect of packaging that facilitate recycling and also help to reduce damage to the environment.
Learn more about:
https://brainly.com/question/20911626
"Variable costs are expenses that" ________. A. remain constant on a per-unit basis but change in total based on activity level B. decrease on a per-unit basis as activity level increases C. remain constant in total regardless of activity level within a relevant range D. remain constant on a per-unit basis and remain constant in total regardless of activity level
Answer:
A. remain constant on a per-unit basis but change in total based on activity level
Explanation:
In the short run, variable costs only vary according to the total output of the company. E.g. a company's variable cost of manufacturing product X is $10 per unit. If it produces 10,000 units, total variable costs will = $10 x 10,000 = $100,000.
In the long run variable costs will probably vary because production processes will also vary or the cost of inputs change.
Data concerning Pellegren Corporation's single product appear below: Fixed expenses are $531,000 per month. The company is currently selling 4,000 units per month. The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change? Select one: a. decrease of $18,000 b. increase of $38,000 c. decrease of $38,000 d. increase of $58,000
Answer:
a. decrease of $18,000
Explanation:
The calculation of overall effect on the company's monthly net operating income is shown below:-
Particulars Current Proposed
Sales $800,000 $837,000
($200 × 4,000) (200 - 14) × (4,000 + 500)
Variable
expenses $160,000 $180,000
(40 × 4,000) (40 × (4,000 + 500))
Contribution
margin $640,000 $657,000
Fixed
expenses $531,000 $566,000
($531,000 + 350,00)
Net operating
income $109,000 $91,000
Decrease in net operating income is
= $109,000 - $91000
= $18,000