Answer questions 1-7.

Question 5 addresses “committed” vs. “discretionary” fixed costs.  Below are the working definitions, of both:

Committed Fixed Costs – This is fixed costs which cannot be cut without affecting an organization’s ability to achieve long term goals. (i.e. Machinery, Rent)

Discretionary Fixed Costs – This is Fixed Costs which have no direct relationship between inputs and outputs. These costs are determined on a year to year basis. (i.e. company funded child care center, company funded country club)

Question 6 addresses WACM (Weighted Average Contribution Margin).  Technically, each segment should be proportionally weighted, however in this case, on page 4, exhibit one, simply take TOTAL CONTRIBUTION MARGIN / TOTAL REVENUE (last column on right) should yield the same result and save you computational time.  This information is found on Page 4, Exhibit one.

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