Chapter 20: Q20RQ (page 1119)
What is sensitivity analysis? How do managers use this tool?
Answer
A sensitivity analysis is a “what if” technique.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Identifying variable, fixed, and mixed costs Holly’s Day Care has been in operation for several years. Identify each cost as variable (V), fixed (F), or mixed (M), relative to number of students enrolled.
1. Building rent.
2. Toys.
3. Compensation of the office manager, who receives a salary plus a bonus based on number of students enrolled.
4. Afternoon snacks.
5. Lawn service contract at $200 per month.
6. Holly’s salary.
7. Wages of afterschool employees.
8. Drawing paper for students’ artwork.
9. Straight-line depreciation on furniture and playground equipment.
10. Fee paid to security company for monthly service.
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 \(6,000 in fixed costs per month. Calculate the breakeven point in units under each independent scenario.
14. Variable costs increase by \)10 per unit.
15. Fixed costs decrease by $600.
16. Sales price increases by 10%.
No Slip Co. produces sports socks. The company has fixed costs of\(91,080 and variable costs of \)0.81 per package. Each package sells for $1.80.
Requirements
1. Compute the contribution margin per package and the contribution marginratio. (Round your answers to two decimal places.)
2. Find the breakeven point in units and in dollars using the contributionmargin approach.
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?
How can CVP analysis be used by companies with multiple products?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
