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Question 6

Explain in detail the Performance Management cycle with suitable examples.

Question 7

1. What is the importance of Break Even Analysis ?
2. Banana Republic Company, a producer of specialty cards, wants you to complete several calculations based on the information given :

Selling Price/Unit = $9.50 Variable Cost/Unit = $5.50 Total Fixed Costs = $45,500

Required to calculate the following :

1. Break Even point in units
2. Sales Volume necessary to produce a net income of $25,500
3. Total Units required to be sold to earn a Net Income of $32,480

Question 8:

1. Ivory Company, a sole proprietorship, sells only one product. The regular price is

$185. Variable costs are 60% of this selling price, and fixed costs are $12,500 a month.

Management decides to decrease the selling price from $185 to $170 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.

1. At the original selling price of $185 a unit, what is the contribution margin ratio?

- - - - - - - %

2. At the original selling price of $185 a unit, what dollar volume of sales per month is required for Diana Company to break-even? $_ _ _ _ _ _ _
3. At the original selling price of $185 a unit, what dollar volume of sales per month is required for Diana Company to earn a monthly operating income of $15,500?

$_ _ _ _ _ _ _

4. At the reduced selling price of $170 a unit, what is the contribution margin ratio?

- - - - - - - %

5. At the reduced selling price of $170 a unit, what dollar volume of sales per month is required to break-even? $_ _ _ _ _ _ _
6. Explain the significance of Contribution Analysis with special reference to the example above.

Question 9:

What are the traditional methods of evaluation in Financial Planning? Explain also the Interrelationships between the different Financial Statements.

Question 10:

In the Budgeting exercise of any company, what is the significance of a Sales and a Production Budget. What are the inputs required to prepare these Budgets?

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