ACCT-311 Lecture Notes - Lecture 8: Earnings Before Interest And Taxes, Operating Leverage, Contribution Margin
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Brief exercise 8-3 proposing changes in variable costs, fixed costs, selling price, and volume(lo2 cc6) Fixed expenses are ,000 per month, and the company is selling 2,000 units per month. The marketing manager argues that a ,000 increase in the monthly advertising budget would increase monthly sales by ,000. Management is considering using higher-quality components that would increase the variable cost by . 50 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Exercise 8-3 determining operating leverage (lo1 cc1;lo2 cc13) Magic realm, inc. has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of per game. Fixed costs associated with the game total ,000 per year, and variable costs are per game. Production of the game is entrusted to a printing contractor. Variable costs consist mostly of payments to this contractor.