Funday Park competes with Cool World by providing a variety of rides. Funday sells tickets at $85 per person as a one-day entrance fee. Variable costs are $17 per person, and fixed costs are $428,400 per month. Compute Funday Park's contribution margin ratio. Carry your computation to two decimal places. Use the contribution margin ratio approach to determine the sales revenue Funday Park needs to break even. Begin by selecting the formula labels and then enter the amounts to compute the contribution margin ratio. (Enter you answer to the nearest percent, X%.) ÷ = Contribution margin ratio ÷ = % Begin by selecting the formula and then entering the amounts to calculate the sales in dollars Funday needs to break even. (Abbreviation used: CM = contribution margin. Complete all input fields. For items with a zero value, enter "0".) ( + ) ÷ = Required sales in dollars ( + ) ÷ % =
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.
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