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Question: Victoria Company produces a single product. Last


Victoria Company produces a single product. Last year’s income statement is as follows:

Sales (29,000 units) ………………………………………………. $1,218,000
Total variable cost ……………………………………………………… 812,000
Contribution margin ………………………………………………. $ 406,000
Total fixed cost …………………………………………………………. 300,000
Operating income ………………………………………………….., $ 106,000

Required:
1. Compute the break-even point in units and sales dollars calculated using the breakeven units.
2. What was the margin of safety for Victoria last year in sales dollars?
3. Suppose that Victoria is considering an investment in new technology that will increase fixed cost by $250,000 per year but will lower variable costs to 45% of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming that Victoria makes this investment. What is the new break-even point in sales dollars, assuming that the investment is made?



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> Stone Inc. is a company that purchases goods (e.g., chess sets, pottery) from overseas and resells them to gift shops in the United States. Stone Inc. is which of the following? a. Wholesaler b. Retailer c. Service firm d. Manufacturing firm e. None of

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> Which of the following is an indirect cost? a. The cost of denim in a jeans factory b. The cost of mixing labor in a factory that makes over-the-counter pain relievers c. The cost of bottles in a shampoo factory d. The cost of restriping the parking lot

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> An effective managerial accounting system should track information about an organization’s activities in which of the following areas? a. Development b. Marketing c. Production d. Design e. All of these.

> Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promisi

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2.99

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