Break-Even Point: Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales. Contribution Margin: Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost. Margin of Safety: Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point. To compute: Break-even point and margin of safety in units.

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Answer 1

Question

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

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Answer 2

Question

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Expert Solution & Answer

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Answer 3

Question

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Expert Solution & Answer

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Answer 4

Question

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Answer 6

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

Answer 7

Chapter 3, Problem 3.35P

1.

To determine

Break-Even Point:

Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Margin of Safety:

Margin of safety is applied in break-even analysis, which represents the amount which surpasses the break-even point.

To compute: Break-even point and margin of safety in units.

Answer 8

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

Answer 9

2.

a.

To determine

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

Answer 10

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

Answer 11

b.

To determine

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

Answer 12

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Answer 13

c.

To determine

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4Q Ch. 3 - Prob. 3.5Q Ch. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8Q Ch. 3 - Prob. 3.9Q Ch. 3 - Give an example of how a manager can decrease...

To compute: Change in average revenue per customer to help A Company achieve its desired margin of safety.

To compute: Change in planned number of marketing plans to help A Company achieve its desired margin of safety.

To compute: 5% increase in fixed cost and $2 reduction in variable cost to help A Company achieve its desired margin of safety.

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Chapter 3 Solutions