Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 3 - Cost-Volume-Profit Analysis - Assignment Material - Exercises - Page 95: 3-20(4)

Answer

This question involves determining the impact on net income of change in 04 variables namely (i) Sales Volume, (ii) Sales Price, (iii) Fixed Costs and (iv) Variable Costs. It is significantly important to understand how volume and price change impact contribution margin while preparing this analysis.

Work Step by Step

(W-1) : [USD 0.5 × 80% Per Unit] × [5,000,000 × 1.40 units] USD 2,800,000 (W-1) : [USD 0.3 × 90% Per Unit] × [5,000,000 × 1.40 units] USD 1,890,000 (W-3) : USD 900,000 × 80% USD 720,000
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