Quintanilla Corporation's controller is preparing a business plan for 20X7. The anticipated level of business activity consists of the following key cost factors:
Total fixed costs $2,400,000
Total variable costs 1,500,000
Total revenues 4,500,000
Quintanilla's Bank has issued an economic advisory report suggesting that companies should anticipate a severe economic downturn during 20X7.
(a) Determine the level of volume reduction that Quintanilla can absorb before becoming unprofitable.
(b) Distinguish between committed fixed costs and discretionary fixed costs. What is the importance of this distinction in planning for business cycles?

For each of the following situations, indicate whether you agree or disagree with the financial reporting practice employed and state the basic assumption, component, or accounting principle that is applied (if you agree) or violated (if you disagree).wagner corporation adjusted the valuation of all assets and liabilities to reflect changes in the purchasing power of the dollar.spooner oil company changed its method of accounting for oil and gas exploration costs from successful efforts to full cost. no mention of the change was included in the financial statements. the change had a material effect on spooner's financial statements.cypress manufacturing company purchased machinery having a five-year life. the cost of the machinery is being expensed over the life of the machinery.rudeen corporation purchased equipment for $180,000 at a liquidation sale of a competitor. because the equipment was worth $230,000, rudeen valued the equipment in its subsequent balance sheet at $230,000.davis bicycle company received a large order for the sale of 1,000 bicycles at $100 each. the customer paid davis the entire amount of $100,000 on march 15. however, davis did not record any revenue until april 17, the date the bicycles were delivered to the customer.gigantic corporation purchased two small calculators at a cost of $32.00. the cost of the calculators was expensed even though they had a three-year estimated useful life.esquire company provides financial statements to external users every three years.