Discuss which cost structure would be most beneficial (pure variable or pure fixed) when sales volume...
Discuss which cost structure would be most beneficial (pure variable or pure fixed) when sales volume is increasing and when sales volume is decreasing.
Homework Answers
With increasing volume a company would benefit more from a fixed cost structure because of operating leverage, where each sales dollar represents pure profit once fixed costs are covered.
If volume is decreasing the variable cost structure would be more advantageous, because costs would decrease proportion-ately with decreases in volume. With a pure fixed cost structure, costs stay constant even when sales revenue is decreasing, eventually resulting in a loss.
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Discuss which cost structure would be most beneficial (pure
variable or pure fixed) when sales volume...
3. Company A's cost structure included costs that are mostly variable. Whereas Company B's cost structure...
3. Company A's cost structure included costs that are mostly variable. Whereas Company B's cost structure to include costs that are mostly fixed. In a time of increasing sales, which company will tend realize the most rapid increase in profits? Explain.
One of the most difficult steps in working with cost-volume-profit is determining which costs are variable...
One of the most difficult steps in working with cost-volume-profit is determining which costs are variable costs and which costs are fixed costs. Why would this be such a difficult problem?
The Biloxi Company has the following cost structure: fixed costs of $70,000 per month and variable...
The Biloxi Company has the following cost structure: fixed costs of $70,000 per month and variable costs of $50 per unit. The Birmingham Company has the following cost structure: fixed costs of $60,000 per month and variable costs of $60 per unit. Both companies make the same product, which sells for $100 per unit. There is a sales level at which these two companies earn the same profits. What is that sales level? Which company is more profitable as sales...
Question 3: Computations for fixed and variable costs At current sales volume of 100 units, fixed...
Question 3: Computations for fixed and variable costs At current sales volume of 100 units, fixed costs (FC) are $4 per unit and variable costs (VC) are $8 per unit. a) Compute total fixed costs at current sales volume. total FC400 b) Suppose that sales volume increases to 125 units. At this new volume, total FC FC per uni VC per unit = total VC Enter a number c) Write down the total cost equation: * volume (e.g., if TC...
which of the following is most likely to be variable cost QUESTION 4 Which of the...
which of the following is most likely to be variable
cost
QUESTION 4 Which of the following is most likely to be a variable cost? O A. Rent for CEO's office OB. Depreciation on production equipment O C. Cost of merchandise O D. Factory supervisor's salary 2.5 p QUESTION 8 Gamma Company has a selling price of $3/unit, unit variable costs of $2/unit and total fixed costs of $1,000. Current sales revenue is $12,000. What is the margin of safety...
Categories Cost Function * Average Cost * Average Fixed Cost Variable Costo Fixed Cost - -...
Categories Cost Function * Average Cost * Average Fixed Cost Variable Costo Fixed Cost - - - - - - - measures the cost per unit of output As a function of output, this must be decreasing. - - - - - - - - - - - - - - As a function of output, this should equal zero when output equals zero. - - - - - describes the minimum cost of producing any output level given the...
6. Total cost is calculated as a.the sum of total fixed cost and total variable cost....
6. Total cost is calculated as a.the sum of total fixed cost and total variable cost. b.the product of average total cost and price. c. the sum of all the firm's explicit costs. d. the sum of average fixed cost and average variable cost 7. The formula for the total fixed cost is a.TFC = TC + TVC. b.TFC = TVC -TC c.. TFC = TC/TVC. d.TFC = TC -TVC 8.The Lawn Ranger, a landscaping company, has total costs of...
1. Which of the following must be true when average total cost is decreasing? Average fixed...
1. Which of the following must be true when average total cost is decreasing? Average fixed cost is increasing. Average variable cost is constant. Marginal cost is lower than avergae total cost. Marginal cost is decreasing. 2. Which of the following is true? AVC=ATC+AFC. AFC will go up in the beginning but will eventually go down. MC= (change in TC)/ (change in Q) FC+MC=TC. 3. Which of the following is true? Average product (AP) is increasing when the marginal product...
The Greenback Store’s cost structure is dominated by variable costs with a contribution margin ratio of...
The Greenback Store’s cost structure is dominated by variable
costs with a contribution margin ratio of 0.40 and fixed costs of
$100,800. Every dollar of sales contributes 40 cents toward fixed
costs and profit. The cost structure of a competitor, One-Mart, is
dominated by fixed costs with a higher contribution margin ratio of
0.70 and fixed costs of $244,800. Every dollar of sales contributes
70 cents toward fixed costs and profit. Both companies have sales
of $480,000 for the month....
Wu Company incurred 540,000 of fixed cost and $50,000 of variable cost when 4,000 units of...
Wu Company incurred 540,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units, the total cost per unit will be Multiple Choice $18.00 O $20.00 $20 50 Wu Company incurred $103.600 of fixed cost and $118,400 of variable cost when 3,200 units of product were made and sold. if the company's volume increases to 3.700 units, the total cost per unit will be: Multiple...
3. Company A's cost structure included costs that are mostly variable. Whereas Company B's cost structure to include costs that are mostly fixed. In a time of increasing sales, which company will tend realize the most rapid increase in profits? Explain.
Question 3: Computations for fixed and variable costs At current sales volume of 100 units, fixed costs (FC) are $4 per unit and variable costs (VC) are $8 per unit. a) Compute total fixed costs at current sales volume. total FC400 b) Suppose that sales volume increases to 125 units. At this new volume, total FC FC per uni VC per unit = total VC Enter a number c) Write down the total cost equation: * volume (e.g., if TC...
which of the following is most likely to be variable
cost
QUESTION 4 Which of the following is most likely to be a variable cost? O A. Rent for CEO's office OB. Depreciation on production equipment O C. Cost of merchandise O D. Factory supervisor's salary 2.5 p QUESTION 8 Gamma Company has a selling price of $3/unit, unit variable costs of $2/unit and total fixed costs of $1,000. Current sales revenue is $12,000. What is the margin of safety...
Categories Cost Function * Average Cost * Average Fixed Cost Variable Costo Fixed Cost - - - - - - - measures the cost per unit of output As a function of output, this must be decreasing. - - - - - - - - - - - - - - As a function of output, this should equal zero when output equals zero. - - - - - describes the minimum cost of producing any output level given the...
The Greenback Store’s cost structure is dominated by variable
costs with a contribution margin ratio of 0.40 and fixed costs of
$100,800. Every dollar of sales contributes 40 cents toward fixed
costs and profit. The cost structure of a competitor, One-Mart, is
dominated by fixed costs with a higher contribution margin ratio of
0.70 and fixed costs of $244,800. Every dollar of sales contributes
70 cents toward fixed costs and profit. Both companies have sales
of $480,000 for the month....
Wu Company incurred 540,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units, the total cost per unit will be Multiple Choice $18.00 O $20.00 $20 50 Wu Company incurred $103.600 of fixed cost and $118,400 of variable cost when 3,200 units of product were made and sold. if the company's volume increases to 3.700 units, the total cost per unit will be: Multiple...
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