Sales (20,000 units @ 60 per unit) $1,200,000 Less: Variable cost 20,000@ $45 900,000 Contribution margin 300,000 Less fixed cost 240,000 Net income 60,000 In an effort to increase sales and profits, management is considering the use of a higher quality speaker. The higher quality speaker would increase variable costs by $3 per unit but management could eliminate one quality inspector who is paid a sala of $30,000 per year. The sales manager estimates that the higher quality speaker would increase annual sales by 20 percent. Assuming that the changes are made, what is the expected profit next year? O $280,000 O $290,000 O $270,000 O (240,000) O None of the above
Sales (20,000 units @ 60 per unit) $1,200,000 Less: Variable cost 20,000@ $45 900,000 Contribution margin 300,000 Less fixed cost 240,000 Net income 60,000 In an effort to increase sales and profits, management is considering the use of a higher quality speaker. The higher quality speaker would increase variable costs by $3 per unit but management could eliminate one quality inspector who is paid a sala of $30,000 per year. The sales manager estimates that the higher quality speaker would increase annual sales by 20 percent. Assuming that the changes are made, what is the expected profit next year? O $280,000 O $290,000 O $270,000 O (240,000) O None of the above
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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