Define the following terms with example. RELEVANT COST SUNK COST OPPORTUNITY COST AVOIDABLE AND UNAVOIDABLE COST INCREMENTAL COST BREAK-EVEN POINT
Define the following terms with example. RELEVANT COST SUNK COST OPPORTUNITY COST AVOIDABLE AND UNAVOIDABLE COST INCREMENTAL COST BREAK-EVEN POINT
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Define the following terms with example.
RELEVANT COST
SUNK COST
OPPORTUNITY COST
AVOIDABLE AND UNAVOIDABLE COST
INCREMENTAL COST
BREAK-EVEN POINT
(B)
KPR manufactures installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
In Rs
Amount
Sales
80,000
Variable expenses
32,000
Contribution margin
48,000
Fixed expenses
-38,000
Net operating income
10,000
Required:
Compute the company’s degree of operating leverage.
Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales.
Verify your estimate from part (2) above by constructing a new contribution format income statement for the company assuming a 5% increase in sales.
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