The Ornate Company Produces a Single Product and Has Total

question 63

Essay

The Ornate Company produces a single product and has total costs ranging from $321,875 (at 20,000 units)to $966,875 (at 80,000 units).Sales volume in 2016 was 32,000,and operating income was $45,125.Ornate's product is highly specialized;therefore,no units are kept in inventory.
Required:
(a. )Determine the cost equation for Ornate's costs.
(b. )Prepare a contribution margin income statement for 2016 including separate columns for total dollars,per unit dollars,and percentages.
(c. )Determine the break-even point (in units and in dollars).

Understand the necessity of a hurdle rate surpassing the interest rate for projects financed through borrowed funds.

Recognize the diversity of capital budgeting evaluation methods.

Grasp the application and limitations of the internal rate of return method, especially with uneven cash flows.

Comprehend the net present value method and its relevance to capital budgeting.

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