Chapter 20: Q20-17RQ (page 1119)
Question: What is target profit?
Answer
The target profit is the management’s expected goal.
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A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has $6,000 in fixed costs per month.
6. Prepare a contribution margin income statement for one month if the company sells 200 tables.
7. What is the total contribution margin for the month when the company sells 200 tables?
8. What is the unit contribution margin?
9. What is the contribution margin ratio?
What are the CVP assumptions?
How does a contribution margin income statement differ from a traditional income statement?
Question: Determining total mixed cost
John Street Barber Shop pays \(25 per month for water for the first 8,000 gallons and \)3.50 per thousand gallons above 8,000 gallons. Calculate the total water cost when the barber shop uses 7,000 gallons, 10,000 gallons, and 13,000 gallons.
What is the margin of safety? What are the three ways it can be expressed?
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