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 Weighted Average Contribution Margin: Weighted Average Contribution Margin is calculated for two products with the help of following formula: W e i g h t e d A v e r a g e C o n t r i b u t i o n M a r g i n = ( C o n t r i b u t i o n m a r g i n o f P r o d u c t A * W e i g h t o f p r o d u c t A ) + ( C o n t r i b u t i o n m a r g i n o f P r o d u c t B * W e i g h t o f p r o d u c t B ) 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 profits no loss. Breakeven point in $ is calculated with the help of following formula: Breakeven point ( units ) = Total Fixed Costs (Sales Price Per unit -Variable Cost per unit) To calculate: The required sales to earn desired profit

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 6.4GBP

To determine

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

Weighted Average Contribution Margin:

Weighted Average Contribution Margin is calculated for two products with the help of following formula:
$Weighted Average Contribution Margin = (Contribution margin of Product A * Weight of product A) + (Contribution margin of Product B * Weight of product B)$

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 profits no loss. Breakeven point in $ is calculated with the help of following formula:

$Breakeven point (units) = Total Fixed Costs(Sales Price Per unit -Variable Cost per unit)$

To calculate:

The required sales to earn desired profit

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Please provide the accurate answer to this financial accounting problem using valid techniques.

Denzel Corporation had $8.5 million in gross income, operating expenses of $2.3 million, paid $1.7 million in interest on $15 million borrowed, and paid a dividend of $1.2 million. What is Denzel Corporation's taxable income? a) $3.3 million b) $3 million c) $4.5 million d) $4 million provide answer

What is Bobby's 2019 net income using accrual accounting