Chapter 20: Q20-19RQ (page 1119)
On the CVP graph, where is the breakeven point shown? Why?
Answer
On the CVP graph, the breakeven point is the point where the line of sales revenue and total costs intersects.
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Question: Determining fixed cost per unit
For each total fixed cost listed below, determine the fixed cost per unit when sales are 50, 100, and 200 units.
Store rent $ 5,000
Manager’s salary 3,000
Equipment lease 500
Depreciation on fixtures 250
The Circle Clock Company sells a particular clock for \(25. The variable costs are \)13 per clock and the breakeven point is 250 clocks. The company expects to sell 300 clocks this year. If the company actually sells 400 clocks, what effect would the sale of additional 100 clocks have on operating income? Explain your answer.
What is sensitivity analysis? How do managers use this tool?
A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to the number of stores, is the manager’s salary fixed or variable? Why?
What is a variable cost? Give an example.
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