CVP Flashcards

1
Q

Variable (Direct) Costing

A

Best source of info for Break Even analysis as product costs are DM, DL and Variable OH whereas fixed costs are period costs and applied periodically.

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2
Q

Concept: What is the impact of shifting a product mix to lower CM product?

A
  1. If sales are CONSTANT, then shifting to a lower CM product in overall mix leads to DECREASE in operating income
  2. BEP increases!
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3
Q

Equation: Required Sales for a Pre-Tax Operating Profit, in units

A

Total Fixed Costs + Pre-Tax Operating Profit

÷

Contribution margin per unit

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4
Q

Equation: Required Sales for a Pre-Tax Operating Profit, in $

A

Total Fixed Costs + Pre-Tax Operating Profit

÷

Contribution margin ratio

where

Contribution margin ratio = (Selling Price - Variable Price)/Selling Price

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5
Q

Equation: Break-even Point, single product, in units

A

Total Fixed Costs

÷

Contribution margin per unit

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6
Q

Equation: Break-even Point, single product, in $

A

Total Fixed Costs

÷

Contribution margin ratio

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7
Q

Equation: Break-even Point, multiple-product mix, in units

A

Total Fixed Costs

÷

Weighted Average Contribution per unit

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8
Q

Equation: Pre-tax Profit Target

A

After Tax Profit target

÷

1 - Tax Rate

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9
Q

Equation: Contribution Margin, when given contribution margin ratio

A

Sales x Contribution Margin Ratio

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10
Q

Equation: Contribution margin, alternate version with pre-tax profit

A

Total Fixed Costs + Pre Tax Profit

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