Concept explainers
Concept Introduction:
Cost Volume Profit (CVP) Analysis:
The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.
Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:
Contribution margin = Sales - Variable cost.
Similarly contribution margin ratio = Contribution/sales
Breakeven Point:
The Breakeven point is the level of sales at which the net profit is nil. It can be explained as a situation where the business is generating a sale that is equal to the expenses incurred and hence no
Margin of Safety:
Margin of safety is sales over and above the breakeven level. Margin of safety can be calculated as dollar amount and in units as follows:
To Calculate:
The Margin of safety for the proposed year
Trending nowThis is a popular solution!
Chapter 11 Solutions
Survey of Accounting (Accounting I)
- please help answer Complete the two tables below using the information provided and assume a VAT rate of 15%arrow_forwardUsing the data below compute of the following: Contribution margin per unit in 3. 2018, 4. 2019 5. 2020 BEP in sales units in 6. 2018 7. 2019 8. 2020 BEP in peso sales in 9. 2018 10. 2019 11. 2020 What is the required sales in unit for the desired Net profit 12. 2018 13. 2019 14. 2020 2018 2019 2020 Sales per unit Desired profit Fixed costs. P7.50 P9.00 P10.00 P15,000 P28,000 P30,000 360,000 375,000 420,000 Variable cost Cost per unit: Variable cost 2.50 4.00 4.00arrow_forwardFrom the PW, AW, and FW values below, the conventional B/C ratio is closest to:a. 1.27b. 1.33c. 1.54d. 2.76arrow_forward
- Convert the following scores of different alternatives of a cost attribute to profit scores, each on a scale of 1 to 10: 80,000, 20,000, 70,000. (Report the sum of the resulting three profit scores). Report your answer to the nearest two dicimal places (e.g. 13.53 or 12.00)arrow_forwardSolve this problemarrow_forwardA utility bill consisting of a monthly base, plus an added amount based on usage, is classified as a: Question 2 options: fixed cost. mixed cost. curvilinear cost. variable cost.arrow_forward
- Which of the following equations is correct for determining the required sales in units to generate a targeted amount of pre-tax income (πB) under the equation method (where Q = sales in units, F = total fixed costs, πB = pre-tax profit, v = variable cost per unit, and p = selling price per unit)?arrow_forwardMa1. To arrive at Net ADR Yield, Select one: a. fees associated with distribution channel are subtracted from selling price. b. distribution channel fees are subtracted from standard ADR and the result is divided by Revenue per Available Room (RevPar). c. Net Room Rate is divided by standard ADR. d. the cost of fees associated with the specific distribution channel responsible for a room's sale are divided by the room’s selling price. Clear my choicearrow_forwardCalculate Profit from the following data:Sales: $40000Material cost: $10000Labour cost: $10000Fixed cost: $8000.arrow_forward
- If selling price is $2.08 and cost is $1.60, what is the price/cost ratio?arrow_forwardOn the CVP graph, the next unit sold will increase total cost by an amnount equal to the Select one: O a Difference between contribution margin and fixed costs b.Selling price per unit minus the variable costs per unit c Variable costs per unit d. Contribution margin ratio e Selling price per unitarrow_forwardConsider the NPV sensitivity analysis reported in the following table (the numbers in the body of the table are dollars). Deviation Cover sales Price Operating cost Discount rate +20% -108,680 -70,765 -180,678 -150,987 +10% -122,783 -98,498 -160,094 -145,876 Base case -150,929 -150,929 -150,929 -150,929 -10% -164,890 -189,756 -125,098 -138,743 -20% -189,428 -200,690 -115,867 -133,987 Range 80,748 129,925 64,811 17,000 A) Which variable is the most risky for the project? Explain why. B) Which variable is the least risky for the project? Explain why. C) If you were told that the probability of any deviation in the risky event you identified in a) was 0.001%, how would that affect the answer you gave in a)?arrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning