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A product has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is the product's fixed cost?
($200,000 - $80,000) * 20%
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What is the formula for breakeven point in units?
This is the formula for breakeven point in units.
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Breakeven analysis assumes that over the relevant range:
Breakeven analysis assumes that all variable costs and revenues are constant on a per-unit basis and are linear over a relevant range. Fixed costs in total are constant.
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ABC company's breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was ABC's contribution margin?
The margin of safety is the excess of sales over break-even sales. Assuming variable costs are 60% of selling price, contribution margin may be computed at 40% of selling price as 40% * $780,000 + 40% * $130,000.
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A company has total sales of $80,000, total variable costs of $20,000, and total fixed costs of $30,000. What is the breakeven level in sales dollars?
The contribution margin is sales minus variable costs (80,000-20,000) = 60,000. Then, 60,000/80,000=75%. Then, breakeven is total fixed costs of $30,000/75%=$40,000.
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ABC company is using cost volume profit analysis to determine service rates for the upcoming year. Projected costs are: Contribution margin per service performed $1,800, Variable expenses per service performed 1,000, and Total fixed expenses 360,000. Based on these estimates, what is the approximate breakeven point in the number of services performed?
The formula for breakeven point in number is computed by dividing fixed vests by the contribution margin per unit. This would be 360,000/1,800 = 200.
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Several surveys point out that most managers use full product costs, including unit fixed costs and unit variable costs in developing cost-based pricing. Which of the following is least associated with cost-based pricing?
Target pricing is least associated with cost-based pricing. Target pricing takes the perspective of sales rather than looking internally to costs in order to determine a sales price.
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One approach to measuring divisional performance is return on assets. Return on assets is expressed as income:
On a divisional level, return on assets is operating income divided by average total assets.
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Which of the following ratios would be used to evaluate a company's profitability?
The gross margin ratio describes the ratio of gross margin to sales and serves to evaluate a company's profitability.
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Which of the following is not an assumption of CVP analysis?
The correct assumption instead of this would be "Cost behaviors are expected to stay constant over the relevant range of production volume".
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Which of the following statements is true regarding opportunity cost?
Opportunity cost is the potential benefit lost by selecting a particular course of action. If idle space has no alternative use, there is no benefit foregone, opportunity cost is zero.
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Costs relevant to a make or buy decision include variable labor and variable materials as well as:
Avoidable fixed costs attach to a specific decision and are incurred only if that decision is taken. They are relevant in marginal analysis.
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An important concept in decision making is described as "the contribution to income that is foregone by not using a limited resource to its best alternative use." This concept is called:
Opportunity cost is the contribution to income that is foregone by not using a limited resource for its best alternative use.
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Pro forma financial statements are part of the budgeting process. Normally, the last pro forma statement prepared is:
The statement of cash flows is the last pro forma statement prepared.
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The cash receipts budget includes:
The cash receipts budget includes loan proceeds.
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Which of the following factors would assist in a make or buy analysis?
In assessing how much a decision will cost, as well as how much cash that decision will bring in, a firm can accurately deduce which option is in their best interest.
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Breakeven analysis assumes that over the relevant range:
Breakeven analysis assumes that all variable costs and revenues are constant on a per-unit basis and are linear over a relevant range. Fixed costs in total are constant.
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ABC company's breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was ABC's contribution margin?
The margin of safety is the excess of sales over break-even sales. Assuming variable costs are 60% of selling price, contribution margin may be computed at 40% of selling price as 40% * $780,000 + 40% * $130,000.
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A company has total sales of $80,000, total variable costs of $20,000, and total fixed costs of $30,000. What is the breakeven level in sales dollars?
The contribution margin is sales minus variable costs (80,000-20,000) = 60,000. Then, 60,000/80,000=75%. Then, breakeven is total fixed costs of $30,000/75%=$40,000.
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A product has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is the product's fixed cost?
($200,000 - $80,000) * 20%
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