COST-VOLUME-PROFIT ANALYSIS TRUE/FALSE 1. To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis 2. Cost-volume-profit analysis may be used for multi-product analysis when the proportion of different products remains constant. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis, sales
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for an estimated selling price of $1,000. However, developers of this plan must first conduct a cost volume profit analysis (CVPA) in order to gather pertinent information that will allow the development team to establish goals and objectives to guide the team towards desired results. Calculating the contribution margin (CM), the contribution margin per unit (CMU), the contribution margin ratio (GMR), a required number of sales, and a targeted profit, will provide managers with the information necessary
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step is to determine the total contribution margin for the month of July. This can be done by using the operating leverage concept. Note that a 20% increase in sales has resulted in an 80% increase in net operating income between July and August: [pic] Case 6-33 (continued) Since the net operating income for August increased by 80% when sales increased by 20%, the degree of operating leverage for July must be 4. Therefore, total contribution margin for July must have been:
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CHAPTER 7: COST-VOLUME-PROFIT ANALYSIS QUESTIONS 7-1 The underlying relationship in cost-volume-profit analysis is that costs, revenues, and profits all change in a predictable way as the volume of activity changes. 7-2 It is more practical to find the breakeven point in sales dollars for companies having thousands of individual items. Finding the breakeven point for each item would be laborious and meaningless. 7-3 The contribution margin ratio is: price - variable costs
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CHAPTER 7: COST-VOLUME-PROFIT ANALYSIS QUESTIONS 7-1 The underlying relationship in cost-volume-profit analysis is that costs, revenues, and profits all change in a predictable way as the volume of activity changes. 7-2 It is more practical to find the breakeven point in sales dollars for companies having thousands of individual items. Finding the breakeven point for each item would be laborious and meaningless. 7-3 The contribution margin ratio is: price - variable costs
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Cost-Volume-Profit Analysis Chapter Contents Book Title: Survey of Accounting Printed By: Jean Mette (jeanlucmette@gmail.com) © 2015, 2013 Cengage Learning, Cengage Learning Chapter 11 Cot ehavior and Cot-Volume-Profit Anali Chapter Introduction 11-1 Cost Behavior 11-1a Variable Costs 11-1b Fixed Costs 11-1c Mixed Costs 11-1d Summary of Cost Behavior Concepts 11-2 Cost-Volume-Profit Relationships 11-2a Contribution Margin 11-2b Contribution Margin Ratio 11-2c Unit Contribution Margin
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The contribution margin is referred to a per unit measure of a product’s gross operating margin and is computed by subtracting one’s variable costs from one’s sales revenue. In our particular case it would be subtracting the purchase costs from the purchase revenue to determine the contribution margin per customer. To assume a constant contribution margin per customer all the conditions would also have to stay constant, this meaning the conditions cannot be changed from what they are now and any
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Bridgestone Case Analysis 1. CM/Total Rev = WACM 3,500,000/5,000,000 = .70*100 = 70% 2. A high WACM means that a high percentage of every dollar earned is profit. This means that Bridgestone is keeping the variable costs at a relatively small proportion of the total costs. The fact that the Margin of Safety is $9,000 out of $5,000,000 in revenue might be taken as an indication that they are not doing a good job of controlling overhead, depending on how you define overhead. 3. The
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USES OF B/E • BASIC CALCULATIONS • CONTRIBUTION • CALCULATING B/E POINT • B/E CHARTS • B/E ANALYSIS & EVALUATION • EXAMINERS TIPS NAME: ______________________________ TUTOR GROUP: _____________________ BREAK-EVEN ANALYSIS DEFINITION: - The level of output at which business sales provide just enough revenue to cover all the costs of production. - At the B/E level of output, a business has made NO PROFIT. WHY USE BREAK – EVEN ANALYSIS? 1. To help a business decide how
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Yellow highlight is on test word for word CHAPTER 1 58. Which of the following is not a management function? a. Constraining (NOT) b. Planning c. Controlling d. Directing Product costs consist of b. direct materials, direct labor, and manufacturing overhead. 88. Which one of the following represents a period cost? a. The VP of Sales' salary and benefits 89. Product costs are also called c. inventoriable costs. 98. Cost of goods manufactured is
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