Exam 18: Cost Volume Profit Analysis

Cost volume profit analysis is a popular tool in practice. Why is it so popular?

Cost volume profit applied to the service industry A nursing home has the following annual budget: Which of the following statements is correct if fixed administration costs were increased by $50 000 and all other matters remained the same?

Suppose fixed expenses were to increase by 5.9 per cent. How would this affect the break-even point?

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 sales revenue increases by 15 per cent, what will be the percentage increase in profit before income tax?

Econ Pty Ltd produced and sold 45 000 units of a single product last year. Data concerning the year's profit and loss statement are as follows: What was Econ's total contribution margin for the year?

If a firm has a net profit of $50 000, a revenue of $520 000 and variable costs of $300 000, the operating leverage factor would be 5.5.

Which of the following statements about the safety margin is correct? i. All else being equal, the safety margin is higher when the break even point is lower. Ii The safety margin depends on the budgeted revenue Iii The safety margin is unaffected by fixed cost.

If total costs remain the same, the smaller the proportion of fixed costs in a firm's cost structure

Maxie Pty Ltd makes and sells two types of shoes, Plain and Fancy. Product data is as follows: Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000 and the sales mix remains constant. How many units of Fancy must Maxie Pty Ltd sell to earn a target profit of $31 500?

The firm's fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is $20. The break-even point in units is

If a firm has $4 00 000 in fixed costs, a unit contribution margin of $60 and a target net profit of $80 000, the target sales volume to achieve this profit would be 8000 units.

'Goal seek' analysis provides for which of the following? i. An output for a given set of inputs ii. Required inputs for a given output iii. A range of outputs for a range of inputs

The contribution margin ratio is (all on a per unit basis)

Which of the following assumptions is made when doing a cost volume profit analysis based on activity-based costing?

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: What was Econ's operating leverage?

Suppose the selling price per unit increased from $5.00 to $6.00 per ticket. What effect would this have on the cost volume profit analysis?

Chelonia Ltd manufactures small robot toys. It plans to introduce a new product, Speedie the robot tortoise. The following activity cost information is available: It is expected that each unit of Speedie will sell for $23. The direct material cost for unit is $10. Assuming a tax rate of 40%, how many units of Speedie must Chelonia Ltd produce and sell to make an after-tax profit of $12 000? (For simplicity, assume that you can have partial moves and partial batches - that is, no need to round up the number of batches and the number of moves.)

The total contribution margin is calculated as the difference between

Cost volume profit analysis is based on the separation of fixed and variable costs. The analysis can be stated as an equation as follows: P = a(b - c) - d. In this statement of the equation, P is the profit, and

If the operating leverage factor is known, which of the following can be determined?