Exam 3: Analysis of Cost,Volume,and Pricing to Increase Profitability

During the current year,Vanguard Company sold 80,000 of its only product at a selling price of $60 per unit.Variable costs were $18 per unit,and Vanguard's margin of safety for the year was 25,000 units. Required: 1)Calculate Vanguard's margin of safety ratio for the current year. 2)What was the amount of Vanguard's fixed costs for the current year?

The Varsity Club sells souvenir items at university sporting events for $24 each.The souvenir items cost $16 each.The club is negotiating with the university administration to sell the items in a kiosk in the university student center.Three rental arrangements are under consideration: Option 1: Pay rent of $2,000 Option 2: Pay rent of $1,200 plus 10% of revenue Option 3: Pay the university 25% of revenue The club estimates that it will be able to sell 300 souvenir items during the period. Required: 1)Compute the break-even point in units for each of the three options. 2)Assuming the club reaches its sales target,which option should be chosen?

For a company using target costing,market price minus profit equals target price.

When sales price,fixed cost,variable cost,and production volume are changing simultaneously,the best approach to determining profitability is: