Mang. Accting Chapter 5
CVP analysis focuses on how profit are affected by:
selling price, mix of products sold, total fixed costs, sales volume, unit variable cost
which of the following is the equation to solve for profit in terms of sales volume
profit= (unit contribution margin x unit sales) - fixed expense
to simplify CVP calculations, which of the following is assumed to remain constant
selling price
Target Profit Formula
Unit sales to attain a target profit = (target profit + fixed expenses)/selling price per unit
the margin of safety in ___ form is calculated by dividing the margin of safety in dollars by the selling price per unit
unit
Variable expenses/sales is the calculation of the ____ ____ ratio
variable expense
the CVP graph evaluates CVP relationships over a wide range of _____ levels
activity
assuming the sales price remains constant, an increase in the variable cost per unit will _____ the contribution margin per unit
decrease
if operating leverage is high, a small percentage increase in sales can produce a much ______ percentage increase in NOI
larger
A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as
operating leverage
the relative proportions in which a company's products are sold is refereed to as
sales mix
the break even point is the level of sales at which the profit equals
zero
contribution margin is equal to
sales minus variable expenses
contribution margin divided by sales is the formula for
contribution margin ratio
CVP analysis is based on some ______ that may be violated in practice, but the tool is still generally useful
assumptions
contribution margin
becomes profit after fixed expenses are covered
the break even point indicates the sales volume needed to make contribution margin ____ to fixed expenses
equal
the margin of safety in percentage form is
margin of safety in dollars divided by total budgeted (or actual) sales in dollars
the amount by which sales can drop before losses are incurred is the ______ of _____
margin, safety
to calculate the impact on net income using the contribution margin ratio, ____ the change in ____ by the contribution margin ratio
multiply, sales
Operating leverage is a measure of how sensitive _____ is to a given percentage change in sales dollars
net operating income
Sale dollars are applied on a contribution margin income statement
variable costs, fixed expenses, net income
the variable expense ratio is the ratio of variable expense to
sales
NOI can be calculated
(unit sales- unit sales to break even) x contribution margin
Breakeven-- target profit=$126K. sells product for $50 per unit, variable=$15 and fixed is $98K
28000= 98k/ (50-15)
Terry's trees has reached its break unven point and has calculated its contribution margin ration to be 70%. each $1 increase in sales will have which of the following effects
NOI increase by .70, Total contribution margin increase by .70
If a company with excess capacity has a opportunity to take an order in addition to its regular sales, the sales price per unit must cover which of the following costs?
any costs incurred by accepting the order, variable manufacturing cost per unit
which of the following items are needed to solve for NOI at any projected sales volume above the break even point
break even unit sales, contribution margin per unit, projected unit sales
when constructing a CVP graph, which of the following is represented on the vertical axis
dollars
T/F: Cost structure refers to the relative portion of product and period costs in an organization
false
T/F: the margin of safety is the excess of break even sales dollars over budgeted sales dollars
false
when using incremental analysis, which of the following items are considered when making a decision?
the change in sales dollars, cost, and volume resulting specifically from the decision
to prepare a CVP graph, lines must be drawn representing
total revenue, total expense, and total fixed expense
when constructing a CVP graph, the horizontal axis represents unit
volume
