Exam 18: Cost Volume Profit Analysis

A firm is reorganising and reclassifying its cost structure.What is the effect on the break-even point (if any)if direct labour costs are reduced and fixed indirect labour costs are increased,provided all other items remain unchanged?

The cost volume profit model is a simple model to use because tax is a factor that does not have to be considered.

The total contribution margin is calculated as the difference between:

The concept of cost volume profit analysis is based on classifying costs 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 is reorganising and reclassifying its cost structure.The firm previously classified the item 'glue and nails' as indirect material.The firm is considering now tracing this cost directly to products and treating 'glue and nails' as direct material.What is the effect on the break-even point (if any)of that change,provided all other items remain unchanged?

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?

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

Nesto sells two products: X and Y.The contribution margin ratio for X is 40 per cent and for Y is 50 per cent.If the proportion of sales of X decreases,what will happen to the weighted average contribution margin?

Chelonia Ltd manufactures small robot toys.It plans to introduce a new product,Spunkie,which is a solar-powered robot jellyfish.The break even point for Spunkie is 1500 units at $100 per unit.Assuming that the safety margin is $2000,what is the budgeted sales (in units)?

Which of the following statements is most correct with respect to the assumptions of the cost volume profit model?

Management would prefer a smaller safety margin to a larger one,as the smaller margin puts the company in a better financial position.

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.

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?

Ribco Company Ltd makes and sells only one product.The unit contribution margin is $6,and the break-even point in unit sales is 24 000.What are the company's fixed expenses?

Cost volume profit (CVP)analysis is based on a number of limiting assumptions.Which of the following is not one of the assumptions of the CVP model?

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.What is the contribution margin per units? (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)

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.What is the break-even point in units? (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)

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.

The break-even point is calculated by: