Reference no: EM13351989

Q1 CVP Analysis Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for 2010 as follows-

Sales                                                       $46,000,000

Operating expenses

           Variable expenses $32,200,000

       Fixed expenses         7,500,000

Total expenses                                            39,700,000

Operating Profit                                           $ 6,300,000

Required

1. Define the breakeven point in sales dollars.

2. Define the required sales in dollars to earn a before-tax profit of $8,000,000.

3. What is the breakeven point in sales dollars if the variable cost increases by 12 percent?

Q2 All the following are cautions managers as well as investors should consider when evaluating a firm using ratio analysis EXCEPT-

A. The financial statement is historical as well as may not reflect future performance.

B. Firms frequently window-dress their financial statements.

C. Firms use dissimilar accounting procedures.

D. Several firms operate in only one industry.

Q3 Why do price discerning firms often offer lower prices to children and elderly?

They have a lower inclination to pay than other consumers.

Their demand for goods as well as services tends to be less elastic than other consumers.

Such a strategy lowers the costs of the firm.

These firms are more absorbed in equity than profit maximizing.