Chapter 3 - Cost Volume Profit Analysis

Question 0

Multi product break-even analysis

Answer 0

Weighted average C/S ratio = Total Contribution/ Total Revenue

Break even revenue = Fixed costs/ Weighted average C/S ratio

Target profit = (Fixed costs + Required profit)/ Weighted average C/S ratio

Question 1

Break-even analysis

Answer 1

1. Break-even point in units = Fixed cost/ Contribution per unit
2. Level of activity to earn a required profit = (Required profit + Fixed costs)/ Contribution per unit
3. Margin of Safety = Budgeted level of activity - The break even level of activity
4. C/S Ratio = Contribution/ Sales
5. Breakeven point in sales revenue = Fixed Costs/ C/S Ratio
6. Sales revenue to earn a required profit = (Required profit + Fixed costs)/ C/S Ratio