Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 12, Problem 5SP
a)
Summary Introduction
To determine: The break-even point in units
b)
Summary Introduction
To determine: The break-even point in sales dollar.
c)
Summary Introduction
To determine: The degree of operating leverage.
d)
Summary Introduction
To determine: The projected impact on EBIT.
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Charlevoix Cases makes mobile phone cases. The company has collected the following price and cost characteristics:
Sales price
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Fixed costs
$ 12.00 per case
5.50 per case
391,950 per year
Assume that the company plans to sell 75,300 units annually. Consider requirements (b), (c), and (d) independently of each other.
Required:
a. What will be the operating profit?
b. What is the impact on operating profit if the sales price decreases by 20 percent? Increases by 10 percent?
Note: Do not round intermediate calculations.
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Note: Do not round intermediate calculations.
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projected. What impact will these cost changes have on operating profit for the year? Will profit…
CVP analysis, margin of safety. Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000.
Required:
Compute the contribution margin percentage.
Compute the selling price if variable costs are $16 per unit.
Suppose 75,000 units are sold. Compute the margin of safety in units and dollars.
What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows:
Annual sales
5,000
units
Unit selling price
$
60
Unit variable costs:
Production
$
33
Selling
$
6
Incremental fixed costs per year:
Production
$
34,500
Selling
$
45,000
If the company adds the new product, it expects the contribution margin of other product lines to drop by $15,300 per year. What is the financial advantage (disadvantage) of adding the new product?
Multiple Choice
$40,800
$10,200
$89,700
$25,500
Chapter 12 Solutions
Foundations Of Finance
Ch. 12 - Prob. 1RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 1SPCh. 12 - Prob. 2SPCh. 12 - Prob. 3SPCh. 12 - Prob. 4SPCh. 12 - Prob. 5SPCh. 12 - (Capital structure theory) Match each of the...
Ch. 12 - (Capital structure theory) Which of the following...Ch. 12 - Prob. 8SPCh. 12 - Prob. 9SPCh. 12 - (Assessing leverage use) Financial data for three...Ch. 12 - Prob. 1.1MCCh. 12 - Prob. 1.2MCCh. 12 - Prob. 1.3MCCh. 12 - Prob. 1.4MCCh. 12 - Prob. 2.1MCCh. 12 - Prob. 2.2MCCh. 12 - Prob. 2.3MCCh. 12 - Prob. 3.1MCCh. 12 - Prob. 3.2MCCh. 12 - Prob. 3.3MC
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