Principles of Accounting

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HOMEWORK EXERCISE 6 TEMPLATE
ACCT 5362 | Accounting Principles
For this assignment, you will submit this document containing your answers to the below
questions to the assignment link within Blackboard. A specific word count is not required, but
each question should be answered thoroughly and in a professional manner.
After reading/viewing the materials for this module/week, answer the questions below. The
questions will test your knowledge of concepts from Chapter 3 from the Principles of
Accounting, Vol. II text.
Homework Exercise 6 is due by 11:59 p.m. (CT) on Sunday of Module/Week 6.
Chapter 3
1. In a cost-volume-profit analysis, explain what happens at the break-even point and why
companies do not want to remain at the break-even point.
2. Explain how a manager can use CVP analysis to make decisions regarding changes in
operations or pricing structure.
3. Define operating leverage and explain its importance to a company and how it relates to risk.
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4. Marchete Company produces a single product. They have recently received the results of a
market survey that indicates that they can increase the retail price of their product by 8%
without losing customers or market share. All other costs will remain unchanged. Their most
recent CVP analysis is shown. If they enact the 8% price increase, what will be their new
break-even point in units and dollars?
5. Salvador Manufacturing builds and sells snowboards, skis and poles. The sales price and
variable cost for each are shown:
Their sales mix is reflected in the ratio 7:3:2. What is the overall unit contribution margin for
Salvador with their current product mix?