7-69 Discussion Questions 1. Define breakeven point. Why is the breakeven point important to managers? 2. Describe four different ways cost-volume-profit analysis could be useful to managene material for its signature handbags for $2 less per bag than in the prior year. Kee everything else the same, what effect would this reduction in material cost have on breakeven point for Rockwell Fashion Bags? Now assume that the sales manager de to reduce the selling price of each handbag by $2. What would the net effect of both 3. The purchasing manager for Rockwell Fashion Bags has been able to purchase th these changes be on the breakeven point in units for Rockwell Fashion Bags? 4. Describe three ways that cost-volume-profit concepts could be used by a service organization. 5. "Breakeven analysis isn't very useful to a company because companies need to do more than breakeven to survive in the long run." Explain why you agree or disagree with statement. 6. What conditions must be met for cost-volume-profit analysis to be accurate? 7. Why is it necessary to calculate a weighted-average contribution margin ratio for a of the products' contribution margin ratios just be added together and averag 8. Is the contribution margin ratio of a grocery store likely to be higher or lower than product company when calculating the breakeven point for that company? Why can't al a plastics manufacturer? Explain the difference in cost structure between a grocery store and a plastics manufacturer. How does the cost structure difference impact operating risk? 9. Alston Jewelry had sales revenues last year of $2.4 million, while its breakeven po dollars) was $2.2 million. What was Alston Jewelry's margin of safety in dollars? Wha does the term margin of safety mean? What can you discern about Alston Jewelry trom its margin of safety? 10. Rondell Pharmacy is considering switching to the use of robots to fill prescriptions consist of oral solids or medications in pill form. The robots will assist the human ph cists and will reduce the number of human pharmacy workers needed. This change pected to reduce the number of prescription filling errors, to reduce the customer's wa me, and to reduce the total overall costs. How does the use of the robots affect Pharmacy's cost structure? Explain the impact of this switch to robotics on Rond macy's operating risk. 11. Suppose a company can replace the packing material it currently uses with a bic able packing material. The company believes this move to biodegradable packin terials will be well-received by the general public. However, the biodegradabl ma materials are more expensive than the curren t packing materials and the margin ratios of the related products will drop. What are the arguments for the to use the biodegradable packing materials? What are the arguments for the contribu comp How can CVP techniques be used in supporting a company's sustainability efforts comp use the biodegradable materials? What do you think the company should do 12. Conversely, how might Cvp be a barrier to sustainability efforts