BEC 4 M2 Projection and Forecasting Techniques Part 2

Question 1

Breakeven Point

Answer 1

fixed costs/contribution margin per unit

Question 2

Margin of Safety

Answer 2

current sales-breakeven sales

Question 3

Breakeven point in dollars

Answer 3

fixed costs/contribution margin ratio (contribution margin/sales)

Question 4

variable costing

Answer 4

all fixed overhead is expensed in period incurred. The cost of inventory includes only variable costs, so COGS only includes variable costs. SG&A exp are part of total variable costs. Use # of units sold as cost driver.

Question 5

Absorption Costing

Answer 5

Does not segregate fix and variable costs

Question 6

Absorption Costing Formula

Answer 6

Rev
-COGS
=Gross Margin
-operating exp
=Net Income

Question 7

Contribution Approach

Answer 7

Rev
-variable costs
=contribution margin
-fixed costs=Net income

Question 8

Units expected to sell to achieve profit

Answer 8

(fixed costs+profit)/ contribution margin

Question 9

Difference between variable (contribution) cost method and absorption methods

Answer 9

Under VCM, fixed overhead is treated like a period cost and under ACM fixed overhead is treated as a product cost

Question 10

Cost-Volume-Profit is the same as

Answer 10

Breakeven analysis

Question 11

Contribution Margin Ratio

Answer 11

CM/sales