COMM 305 Study Guide - Final Guide: Printed Circuit Board, Total Absorption Costing, Opportunity Cost

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Calculate cm ratio = cm / sales = ,500,000 / ,000,000 = 50% = ,950,000: calculate the break-even point in sales dollars for the year ending march 31, 2017, if the company changes to an automatic production. (3 marks: prepare cvp income statement (for automatic production) Bep in sales-$ = fixed costs / cm ratio. Calculate cm ratio = cm / sales = ,250,000 / ,000,000 = 75% Calculate cm ratio = cm / sales = ,350,000 / ,000,000 = 45% Required sales-$ = fixed costs + profit target before taxes / new cm ratio. Show your calculations and justify your answer. (3. Equate of option 1 and 2, and solve for s. Answer: starting from above m sales the manual production becomes more profitable. Operating leverage manual: ,000 cm / ,000 operating income = 1. 5. Profit increase manual: ,000 x 1. 5 x 20% = ,000. Operating leverage automated: ,100,000 cm / ,000 operating income = 5. 5.

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