Answered: B - What is the effect of reducing…

Business

Accounting

B - What is the effect of reducing variable costs by 25% on the net profit, if that increase was the result of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

1. The sales volume of a company
is one million dollars per month. If
the company spends ($350,000.) per
month as fixed costs, and the variable
costs are equal to ($0.5) of each dollar.
To check sales, it is required: A -
Determine the corresponding volume
of production, the equilibrium cat?
B - What is the effect of reducing
variable costs by 25% on the net
profit, if that increase was the result of
updates in production lines that caused
an increase in fixed costs by 10%. Note
that sales volume will not change?
C- What is the effect of reducing fixed
costs by (10%) on the net profit, if that
reduction is
Will it cause an increase in variable
costs by a similar percentage, knowing
that the sales volume will not change?

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Similar questions

Why is variable cost $174?
Imagine that you could increase the price for a product that has a profit margin of 8% on its price. If you could increase the price by 1% AND simultaneously keep the sales volume (in unit terms) at the same level as before the price increase, calculate the impact of this price increase on the profit margin. (For this question, assume there are no fixed costs. You just need to calculate the PERCENTAGE CHANGE in profit margin)
The ratio of contribution margin in dollars to the selling price is the: Select one: O profit margin. O break-even point in unit sales. O contribution margin ratio. O net income
Which of the following conditions would cause the break-even point to decrease? a. Increase in unit variable cost b. Decrease in unit selling price c. Decrease in unit variable cost d. Increase in total fixed costs
Given that the total cost, C, is related to sales volume, x, by the equation y=1000+0.2x, say true or false for the following and proof it. (a) The cost-sales line rises $2 for each increase of $10 in sales volume. (b) The slope of the line is interpreted as variable cost
2. The variable cost per unit of activity increases as activity increases.⦁ True⦁ False
Answer full question
Given the mixed cost function y = $6.50x + $3,000. What does the $6.50 represent? a.Total cost per unit of the cost driver b.The fixed cost per unit c.The slope of the cost function d.Total fixed costs
3 Fach of the following would affect the break-even point, except a change in the a. variable costs per unit. c. sales price per unit. d. number of units sold. b. total fixed costs.
Within the relevant range: Select one: O A. variable cost per unit decreases as production decreases. O B. fixed cost per unit increases as production decreases. O C. fixed cost per unit decreases as production decreases. O D. variable cost per unit increases as production decreases.
e. All of these. The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves a. margin of safety. b. unit contribution margin. c. degree of operating leverage. d. sensitivity analysis. e. variable cost reduction. 7-6
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