Cost volume profit analysis

Question 1

definition of break even point

Answer 1

the level of sales at which there is neither profit or loss

Question 2

formula for break even point

Answer 2

fixed costs / unit contribution

Question 3

formula for contribution/ sales ratio

Answer 3

contribution per unit/ selling price per unit

Question 4

formula for margin of safety

Answer 4

budgeted sales - breakeven sales / budgeted sales

Question 5

formula for output required for target profit

Answer 5

fixed costs + target profit / unit contribution

Question 6

formula for break even point for multi product breakeven point

Answer 6

fixed costs / weighted average unit contribution

Question 7

formula for breakeven revenue

Answer 7

fixed costs / weighted average C/S ratio

Question 8

what is C/S

Answer 8

contribution to sales

Question 9

limitations of break even analysis as it assumes that

Answer 9

if there are multiple products, they are sold in a constant mix
all costs can be split into fixed and and variable elements
fixed costs are constant
VC per unit is constant
selling price is constant
inventory levels are constant

Question 10

what is the gradient of the line on the profit volume chart

Answer 10

contribution per unit

Question 11

what does the profit volume graph show

Answer 11

relationship with profit and sales