Question

Companies must make many decisions regarding day-to-day business activities. For each of the following decision-making situations, discuss its impact on a company’s contribution margin, break-even point, margin of safety, and degree of operating leverage.

Required:
1. Whether to pay employees a fixed salary or an hourly wage.
2. Whether to pay commissions to salespeople.
3. Whether to purchase a building or rent space.
4. Whether to purchase component parts or manufacture them.
5. Whether to create its own delivery department (including the purchase and maintenance of delivery vehicles) or contract with a third party, such as FedEx.



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  • CreatedFebruary 27, 2015
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