Give an example of how a manager can decrease variable costs while increasing fixed costs.

Kindmart is an international retail store. Kindmart's managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $\$ 2,000,000\( per month and \)\$ 55$ per order. Kindmart has two options, a partially automated B2B and a fully automated B2B system. The partially automated B2B system will have a fixed cost of \(\$ 6,000,000\) per month and a variable cost of \(\$ 45\) per order. The fully automated B2B system has a fixed cost of \(\$ 14,000,000\) per month and a variable cost of \(\$ 25\) per order. Based on data from the past two years, Kindmart has determined the following distribution on monthly orders: $$\begin{array}{cc} \text { Monthly Number of Orders } & \text { Probability } \\ \hline 300,000 & 0.25 \\ 500,000 & 0.45 \\ 700,000 & 0.30 \end{array}$$ 1. Prepare a table showing the cost of each plan for each quantity of monthly orders. 2\. What is the expected cost of each plan? 3\. In addition to the information system's costs, what other factors should Kindmart consider before deciding to implement a new B2B system?

How does an increase in the income tax rate affect the breakeven point?

Suppose Morrison Corp.'s breakeven point is revenues of \(\$ 1,100,000\) Fixed costs are \(\$ 660,000\) 1\. Compute the contribution margin percentage. 2\. Compute the selling price if variable costs are \(\$ 16\) per unit 3\. Suppose 75,000 units are sold. Compute the margin of safety in units and dollars. 4\. What does this tell you about the risk of Morrison making a loss? What are the most likely reasons for this risk to increase?

Cover Rugs is holding a 2 -week carpet sale at Josh's Club, a local warehouse store. Cover Rugs plans to sell carpets for 950 each. The company will purchase the carpets from a local distributor for 760each, with the privilege of returning any unsold units for a full refund. Josh's Club has offered Cover Rugs two payment alternatives for the use of space. Option 1: A fixed payment of \$7,410 for the sale period Option 2: 10 \% of total revenues earned during the sale period Assume Cover Rugs will incur no other costs. 1\. Calculate the breakeven point in units for (a) Option 1 and (b) Option 2 . 2\. At what level of revenues will Cover Rugs earn the same operating income under either option? a. For what range of unit sales will Cover Rugs prefer Option 1? b. For what range of unit sales will Cover Rugs prefer Option 2 ? 3\. Calculate the degree of operating leverage at sales of 65 units for the two rental options. 4\. Briefly explain and interpret your answer to requirement 3 .

Garrett Manufacturing sold 410,000 units of its product for \(\$ 68\) per unit in 2017 Variable cost per unit is \(\$ 60,\) and total fixed costs are $\$ 1,640,000$ 1\. Calculate (a) contribution margin and (b) operating income. 2\. Garrett's current manufacturing process is labor intensive. Kate Schoenen, Garrett's production manager, has proposed investing in state-of-the-art manufacturing equipment, which will increase the annual fixed costs to $\$ 5,330,000\(. The variable costs are expected to decrease to \)\$ 54$ per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of Schoenen's proposal affect your answers to (a) and (b) in requirement 1? 3\. Should Garrett accept Schoenen's proposal? Explain.