Chapter 18: 11DQ (page 832)
How does assuming that operating activity occurs within a relevant range affect cost-volume-profit analysis?
Answer
Assumptions regarding relevant range help in cost classification and justification of relation between the volume, cost, and revenue.
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Refer to the information in Exercise 18-16. Assume the company is considering investing in a new machine that will increase its fixed costs by \(40,500 per year and decrease its variable costs by \)9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.
Blanchard Company manufactures a single product that sells for \(180 per unit and whose total variable costs are \)135 per unit. The company’s annual fixed costs are $562,500. Prepare a CVP chart for the company.
_____ of _____ reflects expected sales in excess of the level of break-even sales.
Refer to Vijay Company’s data in QS 18-17. Compute its product cost per unit under variable costing.
In performing CVP analysis for a manufacturing company, what simplifying assumption is usually made about the volume of production and the volume of sales?
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