Exam 18: Cost Volume Profit Analysis

Which of the following do limitations of cost volume profit include? i. Not all costs can be classified as fixed or variable. ii. Revenue changes may not be linear. iii. Sales volume is the only cost driver. iv. Inventory levels do not change.

A firm makes and sells three standard products in a specific product mix. All three products are made using the same production facilities. The following budgeted data for the coming year is available. Total annual fixed costs $348 000 Tax rate 40% Calculate the margin of safety for the firm.

The operating leverage factor is calculated as

When calculating the breakeven point with a company that has multiple products, there is no real need to know the proportion of the sales for each product.

A firm has an operating leverage factor of 4. This means that

Would you expect the following to be high or low in an automated firm: (1) safety margin, (2) operating leverage and (3) profit potential?

Chelonia Ltd manufactures small robot toys. It plans to introduce two products, Speedie and Spunkie. It is anticipated that the product mix will be 40% Speedie and 60% Spunkie. One unit of Speedie will be sold for $100, with variable cost equals $40. For a unit of Spunkie, the selling price will be $120 and the variable cost is $70. The fixed cost for producing the two products is $108 000. What is the break even point?

Chelonia Ltd manufactures small robot toys. It plans to introduce two products, Speedie and Spunkie. It is anticipated that the product mix will be 40% Speedie and 60% Spunkie. One unit of Speedie will be sold for $100, with variable cost equals $40. For a unit of Spunkie, the selling price will be $120 and the variable cost is $70. The fixed cost for producing the two products is $108 000. The company plans to include a safety margin of $20 000 before tax. Assuming a tax rate of 30%, what should be the budgeted sales?

If a firm has $482 500 in fixed costs, a target net profit of $80000 and targeted sales volume of 12 500 units, the unit contribution margin would be

A firm produces products A and

When fixed costs are divided by the contribution margin ratio the result will provide management with the break-even point in sales dollars.

Which of the following statements applies to cost volume profit and sensitivity analysis? i. Only one variable is changed. ii. All variables are changed. iii. One or more variables are changed. iv. Only one set of variables need be assessed.

Which of the following statements about the cost-volume-profit graph is false?

The break-even point is that level of activity where

Which of the following changes will affect the unit contribution margin?

The concept of cost volume profit analysis is based on classifying costs as

Describe and illustrate with an example, the steps required to construct a cost volume profit (CVP) graph.

When management runs several CVP analyses with different combinations of estimates this is known as

Econ Pty Ltd produced and sold 45 000 units of a single product last year. Data concerning the year's profit and loss statement is as follows: Assuming all cost relationships will remain constant for the coming year, how many units must be sold for the company to earn an after-tax profit of $180 000 if the income tax rate is 40 per cent?

The difference between the budgeted sales revenue and the break-even sales revenue is the