Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Question
Chapter 3, Problem 34E
a.
To determine
Compare the cost structure of Company G and Company O.
b.
To determine
Determine the increase in the profit of the companies when the sale increases by 15%.
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The Greenback Store’s cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $90,000. Every dollar of sales contributes 45 cents toward fixed costs and profit. The cost structure of a competitor, One-Mart, is dominated by fixed costs with a higher contribution margin ratio of 0.70 and fixed costs of $277,500. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $750,000 for the month.
Required:
a. Compare the two companies’ cost structures.
b. Suppose that both companies experience a 15 percent increase in sales volume. By how much would each company’s profits increase?
The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.31 and fixed costs of
$72,120. Every dollar of sales contributes 31 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield
Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.69 and fixed costs of $552,920. Every
dollar of sales contributes 69 cents toward fixed costs and profit. Both companies have sales of $1,202,000 for the year.
Required:
a. Compare the two companies' cost structures.
b. Suppose that both companies experience a 10 percent increase in sales volume. By how much would each company's profits
increase?
Complete this question by entering your answers in the tabs below.
Required A Required B
> Answer is complete but not entirely correct.
Compare the two companies' cost structures.
Sales
Variable cost
Contribution
margin
Fixed costs
Operating profit
Dennis's Retail Mart's
Amount
$ 1,202,000✔…
The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.31 and fixed costs of
$72,120. Every dollar of sales contributes 31 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield
Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.69 and fixed costs of $552,920. Every
dollar of sales contributes 69 cents toward fixed costs and profit. Both companies have sales of $1,202,000 for the year.
Required:
a. Compare the two companies' cost structures.
b. Suppose that both companies experience a 10 percent increase in sales volume. By how much would each company's profits
increase?
Complete this question by entering your answers in the tabs below.
Required A Required B
Answer is complete but not entirely correct.
Compare the two companies' cost structures.
Sales
Variable cost
Contribution
margin
Fixed costs
Operating profit
Dennis's Retail Mart's
Amount
$ 1,202,000
372,620…
Chapter 3 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 3 - Write out the profit equation and describe each...Ch. 3 - What are the components of total costs in the...Ch. 3 - How does the total contribution margin differ from...Ch. 3 - Compare cost-volume-profit (CVP) analysis with...Ch. 3 - Fixed costs are often defined as fixed over the...Ch. 3 - Prob. 6RQCh. 3 - What is the margin of safety? Why is this...Ch. 3 - Prob. 8RQCh. 3 - Write out the equation for the target volume (in...Ch. 3 - How do income taxes affect the break-even...
Ch. 3 - Why is it common to assume a fixed sales mix...Ch. 3 - What are some important assumptions commonly made...Ch. 3 - Prob. 13CADQCh. 3 - Prob. 14CADQCh. 3 - The typical cost-volume-profit graph assumes that...Ch. 3 - The assumptions of CVP analysis are so simplistic...Ch. 3 - Prob. 17CADQCh. 3 - Consider a class in a business school where volume...Ch. 3 - Prob. 19CADQCh. 3 - Prob. 20CADQCh. 3 - Consider the Business Application,...Ch. 3 - Consider the Business Application,...Ch. 3 - Prob. 23CADQCh. 3 - Profit Equation Components Identify each of the...Ch. 3 - Profit Equation Components Identify the letter of...Ch. 3 - Basic Decision Analysis Using CVP Anus Amusement...Ch. 3 - Basic CVP Analysis The manager of Dukeys Shoe...Ch. 3 - CVP AnalysisEthical Issues Mark Ting desperately...Ch. 3 - Basic Decision Analysis Using CVP Derby Phones is...Ch. 3 - Prob. 30ECh. 3 - Basic Decision Analysis Using CVP Warner Clothing...Ch. 3 - Basic Decision Analysis Using CVP Refer to the...Ch. 3 - Prob. 33ECh. 3 - Prob. 34ECh. 3 - Analysis of Cost Structure Spring Companys cost...Ch. 3 - CVP and Margin of Safety Bristol Car Service...Ch. 3 - CVP and Margin of Safety Caseys Cases sells cell...Ch. 3 - Prob. 38ECh. 3 - Prob. 39ECh. 3 - Refer to the data for Derby Phones in Exercise...Ch. 3 - Refer to the data for Warner Clothing in Exercise...Ch. 3 - CVP with Income Taxes Hunter Sons sells a single...Ch. 3 - CVP with Income Taxes Hammerhead Charters runs...Ch. 3 - Prob. 44ECh. 3 - Prob. 45ECh. 3 - Prob. 46ECh. 3 - Prob. 47ECh. 3 - CVP Analysis and Price Changes Argentina Partners...Ch. 3 - Prob. 49PCh. 3 - CVP AnalysisMissing Data Breed Products has...Ch. 3 - Prob. 51PCh. 3 - Prob. 52PCh. 3 - CVP AnalysisSensitivity Analysis (spreadsheet...Ch. 3 - Prob. 54PCh. 3 - Prob. 55PCh. 3 - Extensions of the CVP ModelSemifixed (Step) Costs...Ch. 3 - Prob. 57PCh. 3 - Extensions of the CVP ModelTaxes Odd Wallow Drinks...Ch. 3 - Prob. 59PCh. 3 - Prob. 60PCh. 3 - Extensions of the CVP ModelTaxes Toys 4 Us sells...Ch. 3 - Extensions of the CVP AnalysisTaxes Eagle Company...Ch. 3 - Extensions of the CVP ModelMultiple Products...Ch. 3 - Extensions of the CVP ModelMultiple Products...Ch. 3 - Prob. 65PCh. 3 - Prob. 66PCh. 3 - Prob. 67PCh. 3 - Prob. 68PCh. 3 - Extensions of the CVP ModelMultiple Products and...Ch. 3 - Extensions of the CVP ModelTaxes With Graduated...Ch. 3 - Prob. 71PCh. 3 - Financial Modeling Three entrepreneurs were...
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