Costing Fundamentals

Question 1

Cost-volume-profit assumptions

Answer 1

1. Cost and revenue relationships are predictable and linear.
2. Unit selling price and market conditions are constant.
3. Production equals sales.
4. Total variable costs change with volume, but unit variable costs are fixed.
5. Fixed costs are constant, but unit fixed costs are variable.

Question 2

Breakeven point in units

Answer 2

Fixed Costs divided by

Unit Contribution Margin

Question 3

Breakeven point in dollars

Answer 3

Fixed Costs divided by

Contribution Margin Ratio