Breakeven Analysis Practice Quiz Company XYZ has $2,500,000 in fixed costs. It sells products at an average selling price of $50. Average variable costs amount to 60% of selling price. The marketing department proposes spending $500,000 on an advertising campaign which will result in increased volume of between 10,000 and 30,000 units. Determine: 1. Breakeven volume before the proposed ad campaign 2. Breakeven volume if ad campaign undertaken 3. Minimum and maximum incremental profit if ad campaign undertaken 4. Would you support the proposal? Why or why not? 5. Unit volume to achieve an operating profit of $800,000 assuming the ad campaign is undertaken 6. Operating income at unit volume of 200,000 units assuming ad campaign is undertaken 7. Margin of safety assuming volume of 200,000 units is achieved and ad campaign undertaken 8. Incremental operating income if an additional 1,000 units are sold
Breakeven Analysis Practice Quiz Company XYZ has $2,500,000 in fixed costs. It sells products at an average selling price of $50. Average variable costs amount to 60% of selling price. The marketing department proposes spending $500,000 on an advertising campaign which will result in increased volume of between 10,000 and 30,000 units. Determine: 1. Breakeven volume before the proposed ad campaign 2. Breakeven volume if ad campaign undertaken 3. Minimum and maximum incremental profit if ad campaign undertaken 4. Would you support the proposal? Why or why not? 5. Unit volume to achieve an operating profit of $800,000 assuming the ad campaign is undertaken 6. Operating income at unit volume of 200,000 units assuming ad campaign is undertaken 7. Margin of safety assuming volume of 200,000 units is achieved and ad campaign undertaken 8. Incremental operating income if an additional 1,000 units are sold
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 8E
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Can you please reveiw and answer questions 1-3? Thank you.
Transcribed Image Text:Breakeven Analysis Practice Quiz
Company XYZ has $2,500,000 in fixed costs. It sells products at an average selling price of $50.
Average variable costs amount to 60% of selling price. The marketing department proposes
spending $500,000 on an advertising campaign which will result in increased volume of
between 10,000 and 30,000 units.
Determine:
1. Breakeven volume before the proposed ad campaign
2. Breakeven volume if ad campaign undertaken
3. Minimum and maximum incremental profit if ad campaign undertaken
4. Would you support the proposal? Why or why not?
5. Unit volume to achieve an operating profit of $800,000 assuming the ad campaign is
undertaken
6. Operating income at unit volume of 200,000 units assuming ad campaign is undertaken
7. Margin of safety assuming volume of 200,000 units is achieved and ad campaign
undertaken
8. Incremental operating income if an additional 1,000 units are sold
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Follow-up Question
Company XYZ has $2,500,000 in fixed costs. It sells products at an average selling price of $50.
spending $500,000 on an advertising campaign which will result in increased volume of
between 10,000 and 30,000 units.
Determine:
1.
Breakeven volume before the proposed ad campaign
2. Breakeven volume if ad campaign undertaken
3. Minimum and maximum incremental profit if ad campaign undertaken
4. Would you support the proposal? Why or why not?
5. Unit volume to achieve an operating profit of $800,000 assuming the ad campaign is
undertaken
Operating income at unit volume of 200,000 units assuming ad campaign is undertaken
7. Margin of safety assuming volume of 200,000 units is achieved and ad campaign
undertaken
8. Incremental operating income if an additional 1,000 units are sold
can you please review and answer questions 4-8?
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