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ACC 410 Chapter 3: Chapter 3

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jademallard37
15 Apr 2011
School
Ryerson University
Department
Accounting
Course
ACC 410
Professor
Vanessa Magness

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Document Summary

cost- volume- profit (cvp) analysis: technique that examines changes in profits in response to changes in sales volume, costs, and prices. cvp describes volume, revenues, costs and profits and plan future level of operating activities. values at breakeven or target profit units sold revenues variable, fixed, and total costs. sensitivity of results to changes in: levels of activity cost function selling price sales mix indifference point between alternatives feasibility of planned operations. contribution margin (cm): total revenue minus total cost. profit = total revenue total cost. cm = total revenue total variable cost. cmu (per unit) = selling price per unit variable cost per unit. cmr = s v / s. ebt ( earnings before taxes) = (s-v) x q f. eat (earnings after taxes) = ebt x (1 tax rate) ebt = eat / (1 tax rate) operating income = sales vc fc.

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Related Questions

Cost-volume-profit (CVP)

posted Nov 28, 2016, 4:07 AM

Cost-volume-profit (CVP) analysis is a key step in manydecisions. CVP analysis involves specifying a model of therelations among the prices of products, the volume or level ofactivity, unit variable costs, total fixed costs, and the salesmix. This model is used to predict the impact on profits of changesin those parameters. Explain how changes in activity affectcontribution margin and net operating income.

In cost-volume-profit analysis, the unit contribution margin is:

a. Sales price per unit less cost of goods sold per unit.
b. Sales price per unit less unit fixed cost per unit.
c. Sales price per unit less total variable cost per unit.
d. Sales price per unit less unit total cost per unit.
e. The same as the contribution margin ratio.

Shown here is an income statement inthe traditional format for a firm with a sales volume of 20,000units:


Revenues $ 160,000
Cost of goodssold ($16,000 + $3.20/unit) 80,000
Grossprofit $ 80,000
Operatingexpenses:
Selling ($4,500+ $1.40/unit) 32,500
Administration($7,500 + $1.00/unit) 27,500
Operatingincome $ 20,000
Requirement 1:

Prepare an income statement in thecontribution margin format. (Omitthe "$" sign in your response.)


$
Variableexpenses:
$
Total variableexpenses
Contributionmargin $
Fixedexpenses:
$
Total fixedexpenses
$
Requirement 2:

Calculate the contribution marginper unit and the contribution margin ratio. (Round your answers to 1 decimal place. Omit the"$" and "%" signs in your response.)


Contribution margin per unit $
Contributionmargin ratio %
Requirement 3:
(a)

Calculate the firm's operatingincome (or loss) if the volume changed from 20,000 units to 25,000units. (Input the amount aspositive value. Omit the "$" sign in your response.)


operating income
 $


(b)

Calculate the firm's operatingincome (or loss) if the volume changed from 20,000 units to 11,000units. (Input the amount aspositive value. Omit the "$" sign in your response.)


operating loss
 $
Requirement 4:
Refer to your answer to requirement 1 when total revenues were$160,000.

(a)

Calculate the firm's operatingincome (or loss) if unit selling price and variable expenses do notchange, and total revenues increase by $18,000. (Input the amount as positive value. Omit the "$"sign in your response.)


operating income
 $
(b)

Calculate the firm's operatingincome (or loss) if unit selling price and variable expenses do notchange, and total revenues decrease by $12,000. (Input the amount as positive value. Omit the "$"sign in your response.)
operating income
 $