1. Which one of the following is the format of a CVP income statement? A. Sales Variable costs = Fixed costs + Net income.


 Nigel Harper
 2 years ago
 Views:
Transcription
1 1. Which one of the following is the format of a CVP income statement? A. Sales Variable costs = Fixed costs + Net income. B. Sales Fixed costs Variable costs Operating expenses = Net income. C. Sales Cost of goods sold Operating expenses =Net income. D. Sales Variable costs Fixed costs = Net income. 2. Croc Catcher calculates its contribution margin to be less than zero. Which statement is true? A. Its fixed costs are less than the variable cost per unit. B. Its profits are greater than its total costs. C. The company should sell more units. D. Its selling price is less than its variable costs. 3. Which one of the following describes the breakeven point? A. It is the point where total sales equals total variable plus total fixed costs. B. It is the point where the contribution margin equals zero. C. It is the point where total variable costs equal total fixed costs. D. It is the point where total sales equals total fixed costs. 4. The following information is available for Chap Company. Sales $350,000 Cost of good sold $120,000 Total fixed expenses $60,000 Total variable expenses $100,000 Which amount would you find on Chap's CVP income statement? A. Contribution margin of $250,000. B. Contribution margin of $190,000. C. Gross profit of $230,000. D. Gross profit of $190,000.
2 5. Gabriel Corporation has fixed costs of $180,000 and variable costs of $8.50 per unit. It has a target income $268,000. How many units must it sell at $12 per unit to achieve its target net income? A. 51,429 units. B. 128,000 units. C. 76,571 units. D. 21,176 units. 6. Sales mix is: A. important to sales managers but not to accountants. B. easier to analyze on absorption costing income statements. C. a measure of the relative percentage of a company's variable costs to its fixed costs. D. a measure of the relative percentage in which a company's products are sold. 7. Net income will be: greater if more highercontribution margin units are sold than lowercontribution A. margin units. B. greater if more lowercontribution margin units are sold than highercontribution margin units. C. equal as long as total sales remain equal, regardless of which products are sold. D. unaffected by changes in the mix of products sold. 8. If the contribution per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is: A. $25. B. $5. C. $4.
3 D. No correct answer is given. 9. The degree of operating leverage: A. can be computed by dividing total contribution margin by net income. B. provides a measure of the company's earnings volatility. C. affects a company's breakeven point. D. All of the above. 10. A high degree of operating leverage: indicates that a company has a larger percentage of variable costs relative to its A. fixed costs. B. is computed by dividing fixed costs by contribution margin. C. exposes a company to greater earnings volatility risk. D. exposes a company to less earnings volatility risk. 11. Fixed manufacturing overhead costs are recognized as: A. period costs under absorption costing. B. product costs under absorption costing. C. product costs under variable costing. D. part of ending inventory costs under both absorption and variable costing. 12. Net income computed under absorption costing will be: A. higher than net income under variable costing in all cases. B. equal to net income under variable costing in all cases. C. higher than net income under variable costing when units produced are greater than units sold.
4 higher than net income under variable costing when units produced are less than D. units sold. This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test. Grade the Test 0% (0 out of 12 correct) 1. Which one of the following is the format of a CVP income statement? A. Sales Variable costs = Fixed costs + Net income. B. Sales Fixed costs Variable costs Operating expenses = Net income. C. Sales Cost of goods sold Operating expenses =Net income. D. Sales Variable costs Fixed costs = Net income. 2. Croc Catcher calculates its contribution margin to be less than zero. Which statement is true? A. Its fixed costs are less than the variable cost per unit. B. Its profits are greater than its total costs. C. The company should sell more units. D. Its selling price is less than its variable costs. 3. Which one of the following describes the breakeven point? A. It is the point where total sales equals total variable plus total fixed costs. B. It is the point where the contribution margin equals zero. C. It is the point where total variable costs equal total fixed costs. D. It is the point where total sales equals total fixed costs.
5 4. The following information is available for Chap Company. Sales $350,000 Cost of good sold $120,000 Total fixed expenses $60,000 Total variable expenses $100,000 Which amount would you find on Chap's CVP income statement? A. Contribution margin of $250,000. B. Contribution margin of $190,000. C. Gross profit of $230,000. D. Gross profit of $190, Gabriel Corporation has fixed costs of $180,000 and variable costs of $8.50 per unit. It has a target income $268,000. How many units must it sell at $12 per unit to achieve its target net income? A. 51,429 units. B. 128,000 units. C. 76,571 units. D. 21,176 units. 6. Sales mix is: A. important to sales managers but not to accountants. B. easier to analyze on absorption costing income statements. C. a measure of the relative percentage of a company's variable costs to its fixed costs. D. a measure of the relative percentage in which a company's products are sold. 7. Net income will be: A. greater if more highercontribution margin units are sold than lowercontribution margin units. B. greater if more lowercontribution margin units are sold than highercontribution margin units. C. equal as long as total sales remain equal, regardless of which products are sold. D. unaffected by changes in the mix of products sold.
6 8. If the contribution per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is: A. $25. B. $5. C. $4. D. No correct answer is given. 9. The degree of operating leverage: A. can be computed by dividing total contribution margin by net income. B. provides a measure of the company's earnings volatility. C. affects a company's breakeven point. D. All of the above. 10. A high degree of operating leverage: A. indicates that a company has a larger percentage of variable costs relative to its fixed costs. B. is computed by dividing fixed costs by contribution margin. C. exposes a company to greater earnings volatility risk. D. exposes a company to less earnings volatility risk. 11. Fixed manufacturing overhead costs are recognized as: A. period costs under absorption costing. B. product costs under absorption costing. C. product costs under variable costing. D. part of ending inventory costs under both absorption and variable costing. 12. Net income computed under absorption costing will be: A. higher than net income under variable costing in all cases. B. equal to net income under variable costing in all cases. C. higher than net income under variable costing when units produced are greater than units sold. D. higher than net income under variable costing when units produced are less
7 than units sold. Retake Test 1. The format of a CVP Income statement is Sales Cost of goods sold Operating expenses = Net Income. 2. Contribution margin ratio is contribution margin divided by sales. 3. Margin of Safety measures how far sales can drop before a company will be operating at a loss. 4. Sales mix is important for companies that sell only one product. 5. In general, a company should try to sell more low contribution margin products. 6. The formula for computing the breakeven point in sales dollars for a company with multiple
8 products or multiple divisions is fixed costs divided by weighted average contribution margin ratio. 7. Determining the sales mix with limited resources requires determining the products with the highest contribution margin. 8. Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs. 9. Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 10. Variable costing treats fixed manufacturing overhead as product costs. 11. is the amount of revenue that remains after deducting variable costs in a CVP income statement. A. Net income. B. Contribution margin.
9 C. Fixed income. D. Gross income. 12. Given the following information, what is the contribution margin ratio? Sales $900,000 Variable expenses 400,000 Fixed Expenses 300,000 Net Income 200,000 A. 44% B. 22% C. 33% D. 56% 13. In general, a company should sell more units of products with A. a higher contribution margin. B. a lower contribution margin. C. a higher selling price. D. None of the above is correct 14. If a company makes two products R1 and R2 what is the formula for the weightedaverage unit contribution margin? A. (Unit Contribution Margin of R1) + (Unit Contribution Margin of R2) B. (Unit Contribution Margin Ratio of R1) + (Unit Contribution Margin Ratio of R2) C. (Unit Contribution Margin of R1 x Sales Mix Percentage of R1) + (Unit Contribution Margin of R2 x Sales Mix Percentage of R2). D. The correct formula is not listed above. 15. If a company has limited resources:
10 A. there is no effect on sales mix. B. the sales mix is determined by computing contribution margin per unit of limited resource. C. contribution margin per unit is used in determining product mix.. D. it will sell more of the product with the highest contribution margin. 16. Cost structure is: A. the relative proportion of fixed versus variable costs that a company incurs. B. the quantity of fixed costs a company incurs. C. the same as sales mix.. D. the same as contribution margin. 17. A company with high operating leverage: A. has a greater proportion of variable costs to fixed costs.. B. has an equal proportion of fixed and variable costs. C. is less sensitive to changes in sales. D. has a greater proportion of fixed costs to variable costs The degree of operating leverage is computed by dividing A. fixed costs by contribution margin per unit. B. variable costs by contribution margin per unit. C. contribution margin by net income. D. variable costs by contribution margin ratio. 19. If Company A has a higher proportion of fixed costs relative to variable costs than Company B:
11 A. Company A has a higher breakeven point than Company B. B. Company A is more sensitive to changes in sales than Company B. C. Company A has greater risk compared to Company B. D. All of the above are true. 20. The margin of safety ratio is: A. higher for a company with lower operating leverage. B. lower for a company with lower operating leverage. C. is not affected by operating leverage. D. is increased by a greater proportion of variable to fixed costs. 21. If Johnson Company expects to sell VCR's at $100 a unit with variable costs of $60 per unit and DVD's at $200 per unit with variable costs of $120 per unit, what is the weighted average contribution margin if the sales mix is 4 DVD's for 1 VCR: A. $120 B. $160 C. $ 72 D. $ Tolls Company has 2 Divisions: Computers and Appliances. Given the following data, what is the breakeven point in dollars? Total fixed costs $500,000 Salesmix percentage.40 for Computers.60 for Appliances. Contribution margin ratio.45 for Computers.35 for Appliances. Delete blank line A. $1,219,512 B. $1,282,051
12 C. $1,250,000 D. The correct answer is not given. 23. Williams Company sells Mountain Bikes and Racing Bikes. The Mountain Bikes sell for $300 and have variable costs of $125. The Racing Bikes sell for $450 and have variable costs of $275. Williams Company has limited machine hours for production. If Mountain Bikes take 2 machine hours and racing bikes take 2.5 machine hours which product should be emphasized if capacity (machine hours) is increased and sufficient demand exists for each product. A. Racing Bikes. B. Mountain Bikes. C. Neither. The capacity should be divided equally. D. Not enough information is given. 24. Absorption costing treats which of the following items as product costs: A. Fixed Manufacturing overhead. B. Variable manufacturing overhead. C. Marketing and Administrative Costs. D. Both a and b. 25. If Smith Company produces 100,000 units and sells 95,000 units, which costing method will produce a higher net income for the year? A. Variable costing. B. Absorption costing. C. Fixed costing. D. Neither method.
13 This is the end of the test. When you have completed all the questions and reviewed your answers, press the button below to grade the test. Grade the Test 0% (0 out of 25 correct) 1. The format of a CVP Income statement is Sales Cost of goods sold Operating expenses = Net Income. 2. Contribution margin ratio is contribution margin divided by sales. 3. Margin of Safety measures how far sales can drop before a company will be operating at a loss. 4. Sales mix is important for companies that sell only one product. 5. In general, a company should try to sell more low contribution margin products. 6. The formula for computing the breakeven point in sales dollars for a company with multiple products or multiple divisions is fixed costs divided by weighted average
14 contribution margin ratio. 7. Determining the sales mix with limited resources requires determining the products with the highest contribution margin. 8. Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs. 9. Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 10. Variable costing treats fixed manufacturing overhead as product costs. 11. is the amount of revenue that remains after deducting variable costs in a CVP income statement. A. Net income. B. Contribution margin. C. Fixed income. D. Gross income. 12. Given the following information, what is the contribution margin ratio?
15 Sales $900,000 Variable expenses 400,000 Fixed Expenses 300,000 Net Income 200,000 A. 44% B. 22% C. 33% D. 56% 13. In general, a company should sell more units of products with A. a higher contribution margin. B. a lower contribution margin. C. a higher selling price. D. None of the above is correct 14. If a company makes two products R1 and R2 what is the formula for the weightedaverage unit contribution margin? A. (Unit Contribution Margin of R1) + (Unit Contribution Margin of R2) B. (Unit Contribution Margin Ratio of R1) + (Unit Contribution Margin Ratio of R2) C. (Unit Contribution Margin of R1 x Sales Mix Percentage of R1) + (Unit Contribution Margin of R2 x Sales Mix Percentage of R2). D. The correct formula is not listed above. 15. If a company has limited resources: A. there is no effect on sales mix. B. the sales mix is determined by computing contribution margin per unit of limited resource. C. contribution margin per unit is used in determining product mix.. D. it will sell more of the product with the highest contribution margin. 16. Cost structure is: A. the relative proportion of fixed versus variable costs that a company incurs.
16 B. the quantity of fixed costs a company incurs. C. the same as sales mix.. D. the same as contribution margin. 17. A company with high operating leverage: A. has a greater proportion of variable costs to fixed costs.. B. has an equal proportion of fixed and variable costs. C. is less sensitive to changes in sales. D. has a greater proportion of fixed costs to variable costs The degree of operating leverage is computed by dividing A. fixed costs by contribution margin per unit. B. variable costs by contribution margin per unit. C. contribution margin by net income. D. variable costs by contribution margin ratio. 19. If Company A has a higher proportion of fixed costs relative to variable costs than Company B: A. Company A has a higher breakeven point than Company B. B. Company A is more sensitive to changes in sales than Company B. C. Company A has greater risk compared to Company B. D. All of the above are true. 20. The margin of safety ratio is: A. higher for a company with lower operating leverage. B. lower for a company with lower operating leverage. C. is not affected by operating leverage. D. is increased by a greater proportion of variable to fixed costs. 21. If Johnson Company expects to sell VCR's at $100 a unit with variable costs of $60 per unit and DVD's at $200 per unit with variable costs of $120 per unit, what is the
17 weighted average contribution margin if the sales mix is 4 DVD's for 1 VCR: A. $120 B. $160 C. $ 72 D. $ Tolls Company has 2 Divisions: Computers and Appliances. Given the following data, what is the breakeven point in dollars? Total fixed costs $500,000 Salesmix percentage.40 for Computers.60 for Appliances. Contribution margin ratio.45 for Computers.35 for Appliances. Delete blank line A. $1,219,512 B. $1,282,051 C. $1,250,000 D. The correct answer is not given. 23. Williams Company sells Mountain Bikes and Racing Bikes. The Mountain Bikes sell for $300 and have variable costs of $125. The Racing Bikes sell for $450 and have variable costs of $275. Williams Company has limited machine hours for production. If Mountain Bikes take 2 machine hours and racing bikes take 2.5 machine hours which product should be emphasized if capacity (machine hours) is increased and sufficient demand exists for each product. A. Racing Bikes. B. Mountain Bikes. C. Neither. The capacity should be divided equally. D. Not enough information is given. 24. Absorption costing treats which of the following items as product costs: A. Fixed Manufacturing overhead. B. Variable manufacturing overhead. C. Marketing and Administrative Costs. D. Both a and b.
18 25. If Smith Company produces 100,000 units and sells 95,000 units, which costing method will produce a higher net income for the year? A. Variable costing. B. Absorption costing. C. Fixed costing. D. Neither method. Retake Test
CostVolumeProfit Analysis: Additional Issues
61 CostVolumeProfit Analysis: Additional Issues 62 Managerial Accounting Fifth Edition Weygandt Kimmel Kieso study objectives 1. Describe the essential features of a costvolumeprofit income statement.
More informationIdentify how changes in volume affect costs
Chapter 18 Identify how changes in volume affect Total variable change in direct proportion to changes in the volume of activity Unit variable cost remains constant Units produced 3 5 Total direct materials
More informationCostVolumeProfit Analysis
CostVolumeProfit Analysis Costvolumeprofit (CVP) analysis is used to determine how changes in costs and volume affect a company's operating income and net income. In performing this analysis, there
More informationChapter. CostVolumeProfit Relationships
Chapter 6 CostVolumeProfit Relationships 62 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain how changes in activity affect contribution margin. 2. Compute the contribution
More informationQuiz Chapter 7  Solution
Quiz Chapter 7  Solution 1. In an income statement prepared as an internal report using the variable costing method, variable selling and administrative expenses would: A) not be used. B) be treated the
More informationCOSTVOLUMEPROFIT RELATIONSHIPS
TM 51 COSTVOLUMEPROFIT RELATIONSHIPS Costvolumeprofit (CVP) analysis is concerned with the effects on net operating income of: Selling prices. Sales volume. Unit variable costs. Total fixed costs.
More informationChapter 6. Chapter 61. Basics of CostVolumeProfit Analysis. Basics of CostVolumeProfit Analysis. CostVolumeProfit Relationships
Chapter 61 Chapter 6 CostVolumeProfit Relationships McGrawHill /Irwin The McGrawHill Companies, Inc., 2007 Basics of CostVolumeProfit Analysis Contribution Margin (CM) is the amount remaining from
More informationPart Five. Cost Volume Profit Analysis
Part Five Cost Volume Profit Analysis COST VOLUME PROFIT ANALYSIS Study of the effects of changes of costs and volume on a company s profits A critical factor in management decisions Important in profit
More informationModule 12 : Cost Volume Profit Analysis. Lecture 1 : Cost Volume Profit Analysis
Module 12 : Cost Volume Profit Analysis Lecture 1 : Cost Volume Profit Analysis Objectives In this lecture you will learn the following Cost Volume Profit (CVP) Introduction. Fixed costs. Variable costs.
More informationAssumptions of CVP Analysis. Objective 1: Contribution Margin Income Statement. Assumptions of CVP Analysis. Contribution Margin Example
Assumptions of CVP Analysis CostVolumeProfit Analysis Expenses can be classified as either variable or fixed. CVP relationships are linear over a wide range of production and sales. Sales prices, unit
More informationSOLUTIONS TO BRIEF EXERCISES
SOLUTIONS TO BRIEF EERCISES BRIEF EERCISE 61 1. $80 = ($250 $170) 32% ($80 $250) 2. (c) $300 = ($500 $200) (d) 40% ($200 $500) 3. (e) $1,000 = ($300 30%) (f) $700 ($1,000 $300) BRIEF EERCISE 62 PESAVENTO
More informationAccounting Building Business Skills. Learning Objectives: Learning Objectives: Paul D. Kimmel. Chapter Fourteen: Costvolumeprofit Relationships
Accounting Building Business Skills Paul D. Kimmel Chapter Fourteen: Costvolumeprofit Relationships PowerPoint presentation by Kate WynnWilliams University of Otago, Dunedin 2003 John Wiley & Sons Australia,
More informationAccounting 610 2C CostVolumeProfit Relationships Page 1
Accounting 610 2C CostVolumeProfit Relationships Page 1 I. OVERVIEW A. The managerial accountant uses analytical tools to advise line managers in decision making functions. CVP (CVP) analysis provides
More information> DO IT! Chapter 6. CVP Income Statement D1. Solution. Action Plan
Chapter 6 CVP Income Statement Use the CVP income statement format. Use the formula for contribution margin per unit. Use the formula for the contribution margin ratio. Garner Inc. sold 20,000 units and
More informationCreating a Successful Financial Plan
Creating a Successful Financial Plan Basic Financial Reports Balance Sheet  Estimates the firm s worth on a given date; built on the accounting equation: Assets = Liabilities + Owner s Equity Income Statement
More informationCost VOLUME RELATIONS & BREAK EVEN ANALYSIS
1. Introduction The cost volume profit (CVP) analysis helps management in finding out the relationship of costs and revenues to profit. Cost depends on various factors like Volume of production Product
More informationSummary. Chapter Five. Cost Volume Relations & Break Even Analysis
Summary Chapter Five Cost Volume Relations & Break Even Analysis 1. Introduction : The main aim of an undertaking is to earn profit. The cost volume profit (CVP) analysis helps management in finding out
More informationMarginal and absorption costing
Marginal and absorption costing Topic list Syllabus reference 1 Marginal cost and marginal costing D4 2 The principles of marginal costing D4 3 Marginal costing and absorption costing and the calculation
More informationvolumeprofit relationships
Slide 1.3.1 1. Accounting for decision making 1.3 Costvolume volumeprofit relationships Slide 1.3.2 Introduction This chapter examines one of the most basic planning tools available to managers: cost
More informationUNIT2: Session 13 : Cost analysis for planning and decision making :
UNIT2: Session 13 : Cost analysis for planning and decision making : * Cost classification and approach : A Marginal costing :  variable and fixed.  Variable cost is charged to the product unit.
More informationCHAPTER 22 COSTVOLUMEPROFIT ANALYSIS
CHAPTER 22 COSTVOLUMEPROFIT ANALYSIS Related Assignment Materials Student Learning Objectives Conceptual objectives: C1. Describe different types of cost behavior in relation to production and sales
More informationDr. M.D. Chase Accounting 310 Examination 3 Garrison/Noreen 10 th Spring 2003
Exam No: Dr. M.D. Chase Accounting 310 Examination 3 Garrison/Noreen 10 th Spring 2003 Business ethics are the cornerstone of a successful free enterprise economy. Personal ethics are the foundation for
More informationAnswers for Weekly Challenge 2
Answers for Weekly Challenge 2 Challenge 1 (i) The key to calculating the breakeven point is to determine the contribution per unit. Contribution point = $120 ($22 + $36 + $14) = $48 Fixed overhead Breakeven
More informationSession 07. CostVolumeProfit Analysis
Session 07 CostVolumeProfit Analysis Programme : Executive Diploma in Business & Accounting (EDBA 2014) Course : Cost Analysis in Business Lecturer : Mr. Asanka Ranasinghe BBA (Finance), ACMA, CGMA Contact
More informationChapter3D CVP ANALYSIS AND OPERATING LEVERAGE. BSNL, India For Internal Circulation Only 1
Chapter3D CVP ANALYSIS AND OPERATING LEVERAGE BSNL, India For Internal Circulation Only 1 CVP ANALYSIS AND OPERATING LEVERAGE Introduction: Cost Volume Profit analysis is a study of the interrelationship
More informationStudy Unit 8. CVP Analysis and Marginal Analysis
Study Unit 8 CVP Analysis and Marginal Analysis SU 8.1 CostVolumeProfit (CVP) Analysis  Theory CVP = Breakeven analysis Allows us to analyze the relationship between revenue and fixed and variable
More informationQuantitative Marketing Analysis
Quantitative Marketing Analysis CLASS 2 09.16.13 Revenue (sales) Income Statement Sections 5 Expenses Cost of goods sold (FC and VC) Operating expenses (generally FC) Profit 1 EXHIBIT 2.4: PRO FORMA INCOME
More informationLimited factor and breakeven analysis
Chapter 7 Limited factor and breakeven analysis Syllabus Content D  Marginal costing and decisionmaking 15% Contribution concept. Limiting factor analysis. Breakeven charts, profit/volume graphs, breakeven
More informationVariable Costs. Breakeven Analysis. Examples of Variable Costs. Variable Costs. Mixed
Breakeven Analysis Variable Vary directly in proportion to activity: Example: if sales increase by 5%, then the Variable will increase by 5% Remain the same, regardless of the activity level Mixed Combines
More informationCostVolumeProfit Analysis
CostVolumeProfit Analysis CostVolumeProfit Assumptions and Terminology 1 Changes in the level of revenues and costs arise only because of changes in the number of product (or service) units produced
More informationFinancial Analysis, Modeling, and Forecasting Techniques. Course #5710B/QAS5710B Course Material
Financial Analysis, Modeling, and Forecasting Techniques Course #5710B/QAS5710B Course Material TECHNIQUES OF FINANCIAL ANALYSIS, MODELING, AND FORECASTING Delta Publishing Company Copyright 2011 by DELTA
More informationThe variable cost for each component are $ 2,000 The components are sold for $ The company sold during the prior year Ignore income taxes
Hilton Ex 826, 320321 Air safety systems manufactures component used in radar safety systems The firms fixed costs are $ 4,000,000 per year The variable cost for each component are $ 2,000 The components
More informationPrepare, Apply, and Confirm
Prepare, Apply, and Confirm etext Features Keep students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material through authorcreated solutions
More informationMANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse
MANAGERIAL ACCOUNTING 7e Al L. Hartgraves Wayne J. Morse Learning Objective 1 CHAPTER 3 Cost Volume Profit Analysis and Planning Identify the uses and limitations of traditional cost volume profit analysis.
More informationThe term used for the relative proportion in which a company's products are sold is:
The term used for the relative proportion in which a company's products are sold is: profit ~ Your answer is correct. breakeven sales price The correct answer Is shown. In order to convert the margin
More informationIt is important to know the following assumptions in CVP analysis before we can use it effectively.
CostVolumeProfit analysis (Relevant to AAT Examination Paper 3 Management Accounting) Li Tak Ming, Andy, Deputy Head, Department of Business Administration, Hong Kong Institute of Vocational Education
More informationExample 2: A company s car has an original value of $85, 000 and will be depreciated linearly over 6 years with scrap value of $10,000.
Section 1.5: Linear Models An asset is an item owned that has value. Linear Depreciation refers to the amount of decrease in the book value of an asset. The purchase price, also known as original cost,
More informationExercises: Set B. Exercises: Set B 1
Exercises: Set B 1 Exercises: Set B E191B The Do Drop Inn is trying to determine its breakeven point. The inn has 75 rooms that are rented at $50 a night. Operating costs are as follows. Salaries Utilities
More informationHouse Published on www.jpsdir.com
I. Cost  Volume  Profit (Break  Even) Analysis A. Definitions 1. Cost  Volume  Profit (CVP) Analysis: is a means of predicting the relationships among revenues, variable costs, and fixed costs at
More informationMANAGERIAL ACCOUNTING PROJECT
MANAGERIAL ACCOUNTING PROJECT From: MR. HORTENSI 3052375143 jose.hortensi@mdc.edu I am available to help you, make sure you let me know if you need help. To: MANAGERIAL ACCOUNTING STUDENTS. This project
More informationC 6  ACRONYMS notesc6.doc Instructor s Supplemental Information Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM
C 6  ACRONYMS notesc6.doc Instructor s Supplemental Information ACRONYMS (ABBREVIATIONS) FOR USE WITH MANAGERIAL ACCOUNTING RELATING TO COSTVOLUMEPROFIT ANALYSIS. CM Contribution Margin in total dollars
More informationManagerial Accounting Prof. Dr. Vardaraj Bapat Department of School of Management Indian Institute of Technology, Bombay
Managerial Accounting Prof. Dr. Vardaraj Bapat Department of School of Management Indian Institute of Technology, Bombay Lecture  26 Cost Volume Profit Analysis Dear participations in our early session,
More informationCost Behavior and CostVolumeProfit Analysis QUESTIONS
Chapter 18 Cost Behavior and CostVolumeProfit Analysis QUESTIONS 1. A variable cost is one that varies proportionately with the volume of activity. For example, direct materials and direct labor (when
More informationHelena Company reports the following total costs at two levels of production.
Chapter 22 Helena Company reports the following total costs at two levels of production. 10,000 Units 20,000 Units Direct materials $20,000 $40,000 Maintenance 8,000 10,000 Direct labor 17,000 34,000 Indirect
More informationMarginal Costing and Absorption Costing
Marginal Costing and Absorption Costing Learning Objectives To understand the meanings of marginal cost and marginal costing To distinguish between marginal costing and absorption costing To ascertain
More informationFillintheBlank Equations. Exercises
Chapter 20 (5) Variable Costing for Management Analysis Study Guide Solutions 1. Variable cost of goods sold 2. Manufacturing margin 3. Income from operations 4. Contribution margin ratio FillintheBlank
More informationFixed costs. Contribution margin ratio
SOLUTIONS TO EXERCISES EXERCISE 31 (20 minutes) 1. Fixed costs B E point in units = Contribution margin per unit $180,000 $180,000 = = = 7,500 units $40  $16 $24 B E point in sales dollars = Fixed costs
More informationCostVolumeProfit Analysis
CHAPTER 3 Overview CostVolumeProfit Analysis This chapter explains a planning tool called costvolumeprofit (CVP) analysis. CVP analysis examines the behavior of total revenues, total costs, and operating
More informationCHAPTER II LITE RATURE STUDY
CHAPTER II LITE RATURE STUDY 2.1. Cost Terminology Based on Charles T.Horngren (2009: 53), cost is a resource sacrificed or forgone to achieve a specific objective. A cost is usually measured as the monetary
More informationBeginning Balance Ending Balance Raw materials... $22,000 $25,000 Work in process... $52,000 $34,000 Finished goods...
Baba Company is a manufacturing firm that uses joborder costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Balance Ending Balance Raw materials...
More informationACG 2071 Midterm 2 Review Problems & Solutions
ACG 2071 Midterm 2 Review Problems & Solutions 51. On July 1, JKL Corporation s packaging department had Work in Process inventory of 6,000 units that were 75% complete with respect to materials and 30%
More informationQuick Reference for Key Category Management Calculations
Quick Reference for Key Category Management Calculations Average Price  Reflects the average product price in retail stores REGARDLESS of merchandising activity (displays, features, temporary price reductions).
More informationACCOUNTING FOR NONACCOUNTANTS MARGINAL COSTING
ACCOUNTING FOR NONACCOUNTANTS MARGINAL COSTING MARGINAL COSTING OBJECTIVE To be able to: Explain the relevance to management decisions of: Fixed costs Variable costs Contribution Prepare an operating
More informationThe term marginal cost refers to the additional costs incurred in providing a unit of
Chapter 4 Solutions Question 4.1 A) Explain the following The term marginal cost refers to the additional costs incurred in providing a unit of product or service. The term contribution refers to the amount
More informationACG 3024 Accounting for NonFinancial Majors Homework Portfolio Study Guide
ACG 3024 Accounting for NonFinancial Majors Homework Portfolio Study Guide These are similar questions with the answers to help guide you when preparing the Homework Portfolio that you will upload to
More informationName Date. BreakEven Analysis
Name Date BreakEven Analsis In our business planning so far, have ou ever asked the questions: How much do I have to sell to reach m gross profit goal? What price should I charge to cover m costs and
More informationCostVolumeProfit Analysis
HOSP 2110 (Management Acct) Learning Centre CostVolumeProfit Analysis The basic principles of CVP analysis were covered in business math. CVP analysis can be done both graphically, through plotting the
More informationMinistry of Manpower Directorate General of Technological Education NIZWA COLLEGE OF TECHNOLOGY DEPARTMENT OF BUSINESS STUDIES
Ministry of Manpower Directorate General of Technological Education NIZWA COLLEGE OF TECHNOLOGY DEPARTMENT OF BUSINESS STUDIES BAAC 2204: Management Accounting 1 STUDENT NAME STUDENT ID NO. SECTION INSTRUCTIONS
More informationChapter 19 (4) Cost Behavior and CostVolumeProfit Analysis Study Guide Solutions FillintheBlank Equations
Chapter 19 (4) Cost Behavior and CostVolumeProfit Analysis Study Guide Solutions FillintheBlank Equations 1. Variable cost per unit 2. Fixed cost 3. Variable costs 4. Contribution margin 5. Change
More information1. a. and b. Absorption Costing
Problem 713 1. a. and b. Absorption Costing Variable Costing Direct materials... $48 $48 Variable manufacturing overhead... 2 2 Fixed manufacturing overhead ($360,000 12,000 units)... 30 Unit product
More informationFinancial Statements and Ratios: Notes
Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help
More informationBASIC CONCEPTS AND FORMULAE
12 Marginal Costing BASIC CONCEPTS AND FORMULAE Basic Concepts 1. Absorption Costing: a method of costing by which all direct cost and applicable overheads are charged to products or cost centers for finding
More informationMarginal and Absorption Costing (Endofunit assessment)
Unit 7 Marginal and Absorption Costing (Endofunit assessment) 1. Which of the following costing systems complies with Hong Kong Financial Reporting Standards (HKFRS) for external reporting? a) direct
More informationFixed expenses Unit contribution margin. $135,000 = = 5,000 lanterns, $27 per lantern or at $90 per lantern, $450,000 in sales
Exercise 63 (30 minutes) 1. Sales = Variable expenses + Fixed expenses + Profits $90Q = $63Q + $135,000 + $0 $27Q = $135,000 Q = $135,000 $27 per lantern Q = 5,000 lanterns, or at $90 per lantern, $450,000
More informationBUSINESS OCR LEVEL 3 CAMBRIDGE TECHNICAL. Cambridge TECHNICALS MANAGEMENT ACCOUNTING CERTIFICATE/DIPLOMA IN J/502/5419 LEVEL 3 UNIT 8
Cambridge TECHNICALS OCR LEVEL 3 CAMBRIDGE TECHNICAL CERTIFICATE/DIPLOMA IN BUSINESS MANAGEMENT ACCOUNTING J/502/5419 LEVEL 3 UNIT 8 GUIDED LEARNING HOURS: 60 UNIT CREDIT VALUE: 10 MANAGEMENT ACCOUNTING
More informationChapter 011 Project Analysis and Evaluation
Multiple Choice Questions 1. Forecasting risk is defined as the: a. possibility that some proposed projects will be rejected. b. process of estimating future cash flows relative to a project. C. possibility
More informationIncome Measurement and Profitability Analysis
PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance
More informationPart II Management Accounting DecisionMaking Tools
Part II Management Accounting DecisionMaking Tools Chapter 7 Chapter 8 Chapter 9 CostVolumeProfit Analysis Comprehensive Business Budgeting Incremental Analysis and Decisionmaking Costs Chapter 10
More informationDifference: Net Operating Income Increase or (Decrease) Total If Racing Bikes Are Dropped
Exercise 132 1. No, production and sale of the racing bikes should not be discontinued. If the racing bikes were discontinued, then the operating income for the company as a whole would decrease by $11,000
More informationFinancial Objectives
Business Plan Financial Objectives The business plan financial objectives involve measuring financial performance to reflect the total operational performance. The aim in managing this performance should
More informationTopic 4: Cost Volume Profit analysis
Topic 4: Cost Volume Profit analysis Ana Mª Arias Alvarez University of Oviedo Department of Accounting amarias@uniovi.es School of Business Administration Course: Financial Statement Analysis and Management
More informationNeoPrice. By Jaxworks. Pricing Your Product or Service. Hyperlinked Table of Contents
NeoPrice By Jaxworks Pricing Your Product or Service Hyperlinked Table of Contents Pricing by the Retailer Absorption Costing Practical Retail Pricing Concepts Contribution Costing Pricing by the Manufacturer
More informationCostRevenueProfit Functions (Using Linear Equations)
Profit maximization and Cost minimization are fundamental concepts in Business and Economic Theory. This handout is formatted to explain the process of understanding, creating, and interpreting costrevenueprofit
More informationMonth Cash Sales Credit Sales September 100,000 200,000 October 125,000 180,000 November 130,000 210,000 December 135,000 190,000
1. A company that desires to lower its breakeven point should strive to: A. decrease selling prices B. reduce variable costs C. increase fixed costs D. sell more units E. pursue more than one of the above
More informationMath 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price
Math 1314 Lesson 8: Business Applications: Break Even Analysis, Equilibrium Quantity/Price Cost functions model the cost of producing goods or providing services. Examples: rent, utilities, insurance,
More informationCORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ. Semester 1 Examinations 20014/15
CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ Semester 1 Examinations 20014/15 Module Title: Business Finance. Module Code: ACCT 7007 School: Programme Title: Programme Code: School of
More informationCOSTVOLUMEPROFIT ANALYSIS: A MANAGERIAL PLANNING TOOL
15 COSTVOLUMEPROFIT ANALYSIS: A MANAGERIAL PLANNING TOOL DISCUSSION QUESTIONS 1. CVP analysis allows managers to focus on selling prices, volume, costs, profits, and sales mix. Many different whatif
More informationRay H. Garrison, Eric W. Noreen, Peter C. Brewer Managerial accounting
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer Managerial accounting Chapter One Managerial Accounting: An Overview 1 Chapter Two Managerial Accounting and Cost Concepts 24 Chapter Three JobOrder Costing
More informationExhibit 7.5: Graph of Total Costs vs. Quantity Produced and Total Revenue vs. Quantity Sold
244 13. 7.5 Graphical Approach to CVP Analysis (BreakEven Chart) A breakeven chart is a graphical representation of the following on the same axes: 1. Fixed costs 2. Total costs at various levels of
More informationChapter. Breakeven analysis (CVP analysis)
Chapter 5 Breakeven analysis (CVP analysis) 1 5.1 Introduction Costvolumeprofit (CVP) analysis looks at how profit changes when there are changes in variable costs, sales price, fixed costs and quantity.
More informationAccounting 402 Illustration of a change in inventory method
Page 1 of 6 (revised fall, 2006) The was incorporated in January, 20X5. At the beginning of, the company decided to change to the FIFO method. FrankLex had used the LIFO method for financial and tax reporting
More informationStocker, Feeder or Finished Cattle Retained Ownership Closeouts Profitability Analysis User Manual
Stocker, Feeder or Finished Cattle Retained Ownership Closeouts Profitability Analysis User Manual The purpose stocker, feeder or finished Cattle feedyard closeout spreadsheets is to summarize data using
More informationA Case Method Approach of Teaching How CostVolumeProfit Analysis is Connected to the Flexible Budgeting Process and Variance Analysis
A Case Method Approach of Teaching How CostVolumeProfit Analysis is Connected to the Flexible Budgeting Process and Variance Analysis Susan Machuga University of Hartford Carl Smith University of Hartford
More informationChapter 6 CostVolumeProfit Relationships
Chapter 6 CostVolumeProfit Relationships Solutions to Questions 61 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can be used in a variety
More informationCourse 1: Evaluating Financial Performance
Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating
More informationMarginal and. this chapter covers...
7 Marginal and absorption costing this chapter covers... This chapter focuses on the costing methods of marginal and absorption costing and compares the profit made by a business under each method. The
More informationProblems for CFA Level I
Problems for CFA Level I Analysis of Inventories 1. Assume that purchases and unit costs throughout the year were as in Table 1. Inventory at beginning of Quarter I: 400 units at $20 per unit = $8,000.
More informationMultiple Choice Questions (45%)
Multiple Choice Questions (45%) Choose the Correct Answer 1. The following information was taken from XYZ Company s accounting records for the year ended December 31, 2014: Increase in raw materials inventory
More informationCHAPTER 22. CostVolumeProfit Relationships ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief
CHAPTER 22 CostVolumeProfit Relationships ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems * 1. Distinguish between variable and fixed costs.
More informationSection 12.1 Financial Ratios Section 12.2 BreakEven Analysis
Section 12.1 Financial Ratios Section 12.2 BreakEven Analysis OBJECTIVES Explain what a financial ratio is Describe how income statements are used for financial analysis Compare operating ratios and returnonsales
More informationCost volume profit analysis
Cost volume profit analysis Shown below is a typical cost volume profit chart: Required: (a) Explain to a colleague who is not an accountant the reasons for the change in result on this cost volume profit
More informationTHE TRAINING PLACE OF EXCELLENCE Cost and Revenues Practice Assessment: Questions
THE TRAINING PLACE OF EXCELLENCE Cost and Revenues Practice Assessment: Questions Task 1: Inventory control The following information is available for product ZYQ: Annual demand 1,250,000 kilograms Annual
More informationThe following information is available on Toy Inc. There are 100 shares outstanding, each selling for $25
The following information is available on Toy Inc. There are 100 shares outstanding, each selling for $25 Corporate tax 34.00% Interest rate 4.25% Retention ratio 65.00% Case A. Toy Inc. Zero growth in
More informationSolutions to Chapter 3. Accounting and Finance
Solutions to Chapter 3 Accounting and Finance 1. Sophie s Sofas Liabilities & Assets Shareholders Equity Cash $ 10,000 Accounts payable $ 17,000 Accounts receivable 22,000 Longterm debt 170,000 Inventory
More informationThe Role of the Basic Profit Equation in Selecting a Selling Price Ted Mitchell
The Role of the Basic Profit Equation in Selecting a Selling Price Ted Mitchell Consider the following three exam questions: #1 A person bought a wagon at $4 and sold it at a price that provides the desired
More informationMANAGEMENT ACCOUNTING CostVolumeProfit Analysis
MANAGEMENT ACCOUNTING CostVolumeProfit Analysis Zofia KrokoszKrynke, Ph.D., MBA zofia.krokoszkrynke@pwr.edu.pl Wroclaw University of Technology, Building B4 Room 521 http://www.ioz.pwr.edu.pl/pracownicy/krokosz/
More informationYou and your friends head out to a favorite restaurant
19 CostVolumeProfit Analysis Learning Objectives 1 Identify how changes in volume affect costs 2 Use CVP analysis to compute breakeven points 3 Use CVP analysis for profit planning, and graph the CVP
More informationFINANCIAL INTRODUCTION
FINANCIAL INTRODUCTION In earlier sections you calculated your cost of goods sold, overhead expenses and capital cost in order to help you determine the sales price of your product. In your business plan,
More informationStudy Guide  Final Exam Accounting I
Study Guide  Final Exam Accounting I True/False Indicate whether the sentence or statement is true or false. 1. Entries in a sales journal affect account balances in both the accounts receivable ledger
More informationMarginal Cost. Example 1: Suppose the total cost in dollars per week by ABC Corporation for 2
Math 114 Marginal Functions in Economics Marginal Cost Suppose a business owner is operating a plant that manufactures a certain product at a known level. Sometimes the business owner will want to know
More information