The current situation of XZ company is as follows: Variable costs are 84% of sales and fixed costs are $40 000. a) A suggestion is made to improve the profit by increasing the contribution margin. If the contribution margin can be improved by 6% of sales by increasing fixed costs by $10 000, will the break even point be lower? b) If sales are currently $300 000, will the profit be better, assuming no increase in sales?
The current situation of XZ company is as follows: Variable costs are 84% of sales and fixed costs are $40 000. a) A suggestion is made to improve the profit by increasing the contribution margin. If the contribution margin can be improved by 6% of sales by increasing fixed costs by $10 000, will the break even point be lower? b) If sales are currently $300 000, will the profit be better, assuming no increase in sales?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The current situation of XZ company is as follows:
Variable costs are 84% of sales and fixed costs are $40 000.
a) A suggestion is made to improve the profit by increasing the contribution margin. If the
contribution margin can be improved by 6% of sales by increasing fixed costs by
$10 000, will the break even point be lower?
b) If sales are currently $300 000, will the profit be better, assuming no increase in sales?
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