1025 net sales cost of goods sold 682 343 gross profit margin depreciation 31 operating expense administrative expense 103 127 operating profit 82 interest 27 profit before tax 55 17 taxes net income 38 liabilities assets notes payable accounts payable cash 61 223 286 152 a/r 354 inventory асcruals 32 701 total current liabilities 407 current assets net fixed assets 802 long term debt 306 common stock (1.50 par) 102 226 paid in surplus retained earnings 462 total liabilities and stockholder's equity 1503
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
using the following table (image attached) calculate the financial leverage multiplier used in the BMC system
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