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COST VOLUME PROFIT ANALYSIS CASES

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CASE 4-1, WENDELL ROBERTS CONSULTING


a.

Explain why Williams assumption leads to a higher claim. Is this behavior ethical?

Assumption: More costs you assume are fixed the higher claim.

Company can claim higher when the difference between projected and actual

income is vast. 7/5/12

a. Is this behavior ethical?

No, because it can have a bad impact on the companys image if the secret is revealed. Also

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b. Recalculate the claim assuming 40% of selling and administrative costs are variable.
PARTICULARS Sales Less: cost of goods sold Gross margin Less: selling &admin cost (29,56,048 + 3695059+1,00,000) Income from operations

AMOUNT($) 5,05,54,424 4,04,43,539 1,01,10,885 67,51,107 33,59,778

40% of 61,58,432 = 24,63,373 (S & Admin cost of 2004) 20% of 24,63,373 = 4.92,675 Variable cost (2005) = 24,63,373 + 4,92,675 = 29,56,048 61,58,432(T.C) 24,63,373 (V.C) = 36,95,059(F.C)

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CONT

Hence the claim after recalculation would be $3,55,427 - $33,59,778 = $ 30,04,351

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CASE 4-2 ROTHMUELLER MUSEUM

Es

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