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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