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Accounting Workbook Cheat Sheet_8

Tham khảo tài liệu 'accounting workbook cheat sheet_8', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | More free books @ www.BingEbook.com Chapter 10 Analyzing Profit Behavior 217 You don t get too far in discussing raising sales price without bumping into a problem concerning variable operating expenses per unit. Most businesses have two types of variable operating expenses. Some vary with sales volume the number of units sold and some vary with sales revenue the number of dollars from sales . For example sales commissions depend on the dollar amount of sales. In contrast packing and shipping costs depend on the number of units sold and delivered. Q. Suppose that Company B see Figure 10-2 for its profit data could increase its sales price 15 per unit and sell the same number of units. Assume Company B s volume-driven variable operating expenses are 15 per unit sold and its revenue-driven variable operating expenses are 20 percent of sales revenue. How would this 15 sales price increase affect its contribution margin per unit total contribution margin and operating profit A. If the business raises sales price 15 its volume-driven expenses per unit remain the same but its revenue-driven expenses increase 3 per unit which is 20 percent of the 15 sales price increase. So the net gain in contribution margin per unit is only 12. Therefore 12 net increase in contribution margin per unit X 50 000 units sales volume 600 000 contribution margin increase Company B s fixed operating expenses should remain the same a sales price increase should have no bearing on a business s fixed operating expenses . Therefore the increase in contribution margin would increase the business s operating profit 600 000. 15. Suppose that Company B had to drop its sales price 10 due to competitive pressures. All other profit factors remain the same as shown in Figure 10-2. The company s volume-driven variable expenses are 15 per unit sold and its revenue-driven variable operating expenses are 20 percent of sales revenue. Determine Company B s operating profit for this scenario. Also how does this