CVP Analysis

Question 1

Contribution margin

Answer 1

= Revenue - All variable costs

Question 2

Contribution margin per unit

Answer 2

= Unit Sale Price - Unit Variable Cost

Question 3

CM ratio

Answer 3

CM per unit ÷ sales price per unit

Question 4

Break-Even Equation Technique:

Answer 4

Revenue(Q) - variable cost(Q) - fixed cost = Net profit (0)

Question 5

Break-even point in units

Answer 5

Fixed Costs/ Unit Contribution Margin

Question 6

Break-even point in dollars

Answer 6

Fixed Costs/ Contribution Margin ratio

Question 7

Margin of Safety (units)

Answer 7

Expected (or Actual) Sales (units) – Break-even sales (units)

Question 8

Margin of Safety (dollars)

Answer 8

Expected (or Actual) Sales (dollars) – Break-even Sales (dollars)

Question 9

Target operating profit

Answer 9

(Required sales volume x Unit price ) – (Required sales volume x Unit variable cost) – fixed cost

Question 10

Number of units to sell to cover fixed cost

Answer 10

Fixed cost for the company/contribution margin per unit

Question 11

Required Sales in units

Answer 11

= Fixed Costs + Target Operating Income B/T / Unit Contribution Margin

Question 12

Required Sales in dollars

Answer 12

= Fixed Costs + Target Operating Income B/T / Contribution Margin ratio

Question 13

Operating Income after taxes

Answer 13

= operating income before taxes x (1-tax rate)

Question 14

Operating Income before taxes

Answer 14

= operating income after taxes / (1-tax rate)

Question 15

Weighted contribution margin ratio

Answer 15

= total contribution margin/ total sales