Explain how cost-volume-profit analysis

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Review the Chapter opener. Johnny Cupcakes, launched by entrepreneur John Earle, produces t-shirts in unique styles and limited quantities. Selling prices typically range from $40 per shirt to $70 per shirt.

Required: Write a one page memo to John explaining:

1. Identify at least two fixed costs that will not change regardless of how many t-shirts Johnny Cupcakes produces.

2. How could overly optimistic sales estimates potentially hurt John Earle's business?

3. Explain how cost-volume-profit analysis can help John Earle manage Johnny Cupcakes.

Reference no: EM13753470

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