Cost-Volume-Profit Analysis (CVP Analysis): CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs. Break-Even Point: Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales. Contribution Margin Percentage: Contribution margin percentage is the excess of selling price over variable cost demonstrated in percentage. To compute: Break-even point.
Cost-Volume-Profit Analysis (CVP Analysis): CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs. Break-Even Point: Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales. Contribution Margin Percentage: Contribution margin percentage is the excess of selling price over variable cost demonstrated in percentage. To compute: Break-even point.
Solution Summary: The author explains how CVP Analysis measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.
CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.
Break-Even Point:
Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.
Contribution Margin Percentage:
Contribution margin percentage is the excess of selling price over variable cost demonstrated in percentage.
To compute: Break-even point.
2.
To determine
To compute: Total contribution margin and operating income when 175,000 units are sold.
3.
To determine
To compute: Total contribution margin and operating income when 175,000 units are sold.
4.
To determine
To explain: Comparison between break-even point in point 1 and 2. Lower break-even points are not always better.
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College