The Formulas for the High-Low Method has two steps
There two steps in calculating the fixed cost First, calculate the variable cost component and then the fixed cost component.
To calculate the Variable cost component -
(Highest activity Cost - Lowest activity cost Divided by (Highest activity unit - Lowest activity unit)
Next, use the following formula to determine the fixed cost component:
Fixed Cost =Highest activity cost −(Variable Cost × Highest Activity Units)
2. Increase in fixed cost will not impact contribution margin because Contribution margin is a product's selling price minus all associated variable costs, resulting in the incremental profit earned for each unit sold.
Increase in fixed cost will impact income form operations adversely, as the profit will decrease with increase in fixed cost.
3. High contribution margin represents the portion sales revenue that can be used to cover the company's fixed costs. The contribution margin remains the same, even when the number of units produced and sold has changed as the variable cost per unit remains the same. Increasing the production to match the maximum production capacity will enable us to increase the contribution margin to cover the fixed cost and increase operation income. High contribution margin suggests that the product has good price in the market, if the business is able to control the fixed costs then it will help in improving the operation income.
For the initial answers to the questions, 200 words (total) are a good guideline. For full credit you must comment...
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Question 3
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Read the Article posted below, then answer the following
questions:
Mergers & acquisitions are a major form of
corporate diversification strategy, identify and discuss the top
three reasons why most (50-60%) of acquisitions fail to create
shareholder value.
What are the five major components of “CEMEX
Way” and why has this approach been so successful in
post-acquisition integration?
In your opinion, what can other companies learn from
the “CEMEX Way” as a benchmark for acquisition
management?
Article:
CEMEX: Globalization "The...