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I can’t repeat the study notes here, but basically you look for:
1 Incremental costs
2 Opportunity costs caused by the decisionA cost is relevant if it is changed by the decision to invest or manufacture.
if sales price and variable cost per unit increases by 125% and no change in fixed cost.effect on break even point
a) 25% decrease
b) 20% decrease
c) no change
i got 20% decrease if break even is in units, and no change if break even is in revenue.plzzz tell me correct answer.
If SP and VC both increase by 25% (I assume your 125% is incorrect or you mean increase TO 125%, contribution will also go up 25% as it is simply the difference between sp and vc.
So, assume FC = 100,000 and contribution/unit = 8, BEP = 100,000/8 = 12,500
If contribution goes up 25% it will be 10 and BEP = 10,000
The decrease in BEP is (12,500 – 10,000)12,500 = 20%
if the selling price and variable cost increase by 20%and 12% respectively by how much must sales volume change compared with the budgeted level in order to achieve the original budgeted profit for the period?
a) 24.2% decrease
b) 24.2% increase
c) 39.4% decrease
d) 39.4% increasei got no one answer given above instead 18% dec.
kindly help me.
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