8. How much will Hixson's net operating income increase if it can grow production and sales from 25,000 units to 26,500 units? 9. What is Hixson's margin of safety at a sales volume of 25,000 units? (Do not round your intermediate values.) 10. What is Hixson's degree of operating leverage at a sales volume of 25,000 units? (Round your answer to 1 decimal places.)
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
![8. How much will Hixson's net operating income increase if it can grow production and sales from 25,000 units to 26,500 units?
9. What is Hixson's margin of safety at a sales volume of 25,000 units? (Do not round your intermediate values.)
10. What is Hixson's degree of operating leverage at a sales volume of 25,000 units? (Round your answer to 1 decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1fd60a6-e122-44a6-b63f-53f11d7f8fb8%2F249ccd59-330e-4efb-bd34-76834c334e02%2Fnhynfzg_processed.png&w=3840&q=75)
![Hixson Company manufactures and sells one product for $34 per unit. The company maintains no beginning or ending inventories and
its relevant range of production is 20,000 units to 30,000 units. When Hixson produces and sells 25,000 units, its unit costs are as
follows:
Amount
Per Unit
Direct materials
$8.00
$5.00
$1.00
$6.00
$3.50
$2.50
$4.00
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Fixed selling expense
Fixed administrative expense
Sales commissions
Variable administrative expense
$1.00](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1fd60a6-e122-44a6-b63f-53f11d7f8fb8%2F249ccd59-330e-4efb-bd34-76834c334e02%2Fu74gmek_processed.png&w=3840&q=75)
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