Effect of Contribution Margin on the other costs is given below
Explanation:
1.Contribution margin per unit is the net amount that each additional unit sold contributes towards a company's fixed costs and profit. It equals the difference between the product's sales price and variable cost per unit.It represents the incremental money generated for each product/unit sold after deducting the variable portion of the firm's costs.Also known as dollar contribution per unit, the measure indicates how a particular product contributes to the overall profit of the company. It provides one way to show the profit potential of a particular product offered by a company and shows the portion of sales that helps to cover the company's fixed costs. Any remaining revenue left after covering fixed costs is the profit generated.
2.The Formula for Contribution Margin Is
The contribution margin is computed as the difference between the sale price of a product and the variable costs associated with its production and sales process.
Contribution Margin=Sales Revenue - Variable Costs
3.The contribution margin is the foundation for break-even analysis used in the overall cost and sales price planning for products. The contribution margin helps to separate out the fixed cost and profit components coming from product sales and can be used to determine the selling price range of a product, the profit levels that can be expected from the sales, and structure sales commissions paid to sales team members, distributors or commission agents.
4,The contribution margin represents the portion of a product's sales revenue that isn't used up by variable costs, and so contributes to covering the company's fixed costs.
The concept of contribution margin is one of the fundamental keys in break-even analysis.
Low contribution margins are present in labor-intensive companies with few fixed expenses, while capital-intensive, industrial companies have higher fixed costs and thus, higher contribution margins
Answer:
a. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.
b. Investment projects that are financed by savers have larger rates of return than projects that do not receive financing.
Explanation:
Loanable funds refer to the aggregate amount of money that all sectors, entities and individuals within an economy have decided to keep as an investment, instead of spending on personal consumption, by saving and giving them out as loans to borrowers.
The market for loanable funds is in equilibrium when the supply of loanable funds by the saver is equal to demand for loanable funds by the borrowers at a given interest rate.
When the market for loanable funds is in equilibrium, efficiency is maximized because projects that have higher rates of return are given priority to be funded first before the projects with lower rates of return are funded. The reason is that savers that have lowest costs of lending provides funds for the projects that have highest return rates in equilibrium. However, potential saver who do not lend money will prefer a higher interest rates.
Therefore, the correct options related to the two aspects of efficiency that the equilibrium of market for loanable funds exhibits are as follows:
a. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.
b. Investment projects that are financed by savers have larger rates of return than projects that do not receive financing.
Answer:
Increasing the promotional budget for a product in order to increase awareness is not advisable in the short run under which of the following circumstances?
Production capacity is maxed out (200% plant utilization) and the company is stocking out of the product.
Explanation:
Since the production capacity has been exceeded and the company is still running out of stock of the product, there will be no need to increase the promotional budget for the product in order to increase awareness, especially in the short-run. The implication of the scenario is that the demand for the product is far outstripping the supply and there is an apparent scarcity or shortage of the entity's product in the marketplace. Until production the capacity has been expanded, the promotional budget for product awareness can be stopped and saved.
Answer:
$1,060.75
Explanation:
the yield to maturity of the second bond is to 4% semiannual or 8.16% effective annual rate.
so we have to calculate the quarterly interest rate that yields an effective annual rate of 8.16%:
0.0816 = (1 + i)⁴ - 1
1.0816 = (1 + i)⁴
⁴√1.0816 = ⁴√(1 + i)⁴
1.0198 = 1 + i
i = 0.019804 = 1.9804%
now we must discount the first bond using that effective interest rate:
PV of face value = $1,000 / (1 + 4%)²⁰ = $456.39
PV of first 20 coupon payments = $20 x 16.38304 (PV annuity factor, 1.9804%, 20 periods) = $327.66
now we must find the value of the last 20 coupon payments but at the end of year 5 = $25 x 16.38304 = $409.58. Then we calculate the PV = $409.58 / (1 + 4%)¹⁰ = $276.70
the bond's current market value = $456.39 + $327.66 + $276.70 = $1,060.75
