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Ch.09 Kinney 9e SM Final.doc
Ch.09_Kinney_9e_SM_Final.doc
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Ch.09 Kinney 9e SM Final.doc-CHAPTER 9 BREAK-EVEN ...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
Ch.09 Kinney 9e SM Final.doc-CHAPTE...
Ch.09_Kinney_9e_SM_Final.doc-CHAPTER 9 BREAK-EVEN POINT AND COST-VOLUME-PROFIT
Page 13
Chapter 9
273
b.
At the break-even point, Total CM = Total FC; and the CM per unit would
be $1,600 ÷ 4,000 = $0.40. If one unit is sold beyond the break-even point, net
income would rise by $0.40.
c.
$10X
0.40($10X)
$216,000 = 0.25($10X)
$3.50X
= $216,000
X
= 61,715 units (rounded)
d.
In units: 3,200 – 2,800 = 400 units
In dollars: 400 units × $65 per unit = $26,000
Percentage: $26,000 ÷ ($65 × 3,200) = 12.5%
32.
a.
Fixed costs that would increase include the additional equipment costs and
salaries for testing, treating, storage, and disposal of treated waste. Increased
variable costs would include labor wages, the treatment supplies, and energy
costs of performing the treatment and disposing of the neutralized waste. The
increases in these variable costs would lower the product contribution margin
unless prices are raised to compensate.
b.
After determining that the substance is toxic, the president has to consider
business as usual versus the costs of treatment and/or proper disposal that may
make product prices uncompetitive, preserving the health of humans downriver,
the effects on fish, wildlife and the environment, maintaining the good name and
reputation of the company, the impact on the stakeholders should the dumping
be discovered, the legality of falsifying the reports, the impact on the
employees should the plant be closed from lack of profitability, the economic
stability of the town, and its dependence on the plant for survival.
c.
The employees are implying that (1) not addressing the problem is the lesser
of evils because there is no proof that the waste causes cancer; (2) to clean up
the problem may cause the company to become uncompetitive; (3) 10,000
employees could lose their jobs; and (4) the town’s economy could collapse.
The fault with the above rationalizations about the waste not being toxic to
humans lies partially in the fact that the company failed to recognize the
damage to other nonhuman environmental participants. The waste may be
potentially harmful to the fish and other organisms in the river, and the
polluted water is absorbed by the surrounding land (thus polluting the land).
Furthermore, the fishermen sell their polluted catches to outside markets, thus
spreading the effects of the pollution even further.
Fault is also seen in the rationalization because the company falsified the
levels of suspected cancer-causing materials in its reports to authorities. If the
company truly believed that no harm was being done to either the people
downstream or the environment, why were the reports falsified? Doing so
instilled a false sense of security in the members of its society (both
employees and townspeople) regarding their general welfare. If the company
had provided accurate disclosure of toxicity levels, the public would have had
the opportunity to decide whether to remain on their jobs or in the vicinity of
the polluters, look for work elsewhere or relocate to an area where better
conditions exist, or to seek the necessary assistance in requiring the company
to take corrective action.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
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