ITEMS 41 to 45 ARE BASED ON THE FOLLOWING INFORMATION: Basic Illustration Corp. Produces and sells a single product. The selling price is P25 and the variable cists is P15 per unit. The corporation's fixed costs is P100,000 per month. Average monthly sales is 11,000 units. 41. The corporation's contribution margin per unit and as percent of sales (CMR) is a. P10 per unit; 40% b. P40 per unit; 160% c. 10 units; 40% d. P10 per unit; 60% 42. The corporation's break-even point in pesos a. P10,000. b. 250,000 units c. 10,000 or P250,000. d. 250,000 units or P10,000 43. If the corporation desires to earn profit of P20,000 before tax, it must generate sales of a. P12,000 b. 300,000 units c. 10,000 units or 250,000 d. 12,000 units or P300,000 44. If the corporation based corporate income tax at the rate of 30% and it desires to earn after tax profit of P21,000, It must generate sales of a. P325,000 or 13,000 units b. P13,000 or 325,000 units c. 12,040 units or P301,000 d. 16,375 units or P409,375 45. How much sales (in pesos) must be generated their own profit that is 8% of such sales? a. P270,000 b. P312,500 c. P208,333.33 d. P230,000
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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