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    Break even analysis

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    Exercise 16-17 C-V-P Analysis
    The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of $30 per blanket. Kerry buys the blankets from weavers at an average cost of $21. In addition, he has selling expenses of $3 per blanket. Kerry rents the building for $300 per month and pays one employee a fixed salary of $500 per month.

    1.Determine the number of blankets Kerry must sell to break even.
    2.Determine the number of blankets Kerry must sell to generate a profit of $1,000 per month.
    3.Assume that Kerry can produce and sell his own blankets at a total variable cost of $16 per blanket, but that he would need to hire one additional employee at a monthly salary of $600.

    Chapter 22
    Based on this information, which of these three companies would probably improve its product costing accuracy most by converting to activity-based costing (ABC)? Explain your answer.
    Exercise 22-2 Importance of Manufacturing Overhead Allocation
    The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:
    Company A Company B Company C
    Direct materials 7% 21% 42%
    Direct labor 13 42 49
    Manufacturing
    overhead 80 37 9
    100% 100% 100%
    Based on this information, which of these three companies would probably improve its product costing accuracy most by converting to activity-based costing (ABC)? Explain your answer

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