L09 - Cost-Volume-Profit Analysis & Profit Planning Flashcards
How do you calculate the Profit?
Profit
= Total Revenue - Total Costs
PI = R - Y
What is the Expanded Profit formula?
Profit (PI) = pX - (a +bx)
- = Sales price per Unit x Number of Units sold
- - (Total fixed costs + Variable Cost x Number of Units sold)
How do you calculate the Total Costs for a time period?
Y = a + bX
Total Cost
- = Total fixed Costs
-
+ (variable costs per unit
x number of units sold)
How do you calculate the Revenue?
R = pX
Revenue
= Sales price per Unit
x number of units sold
What value does the profit have with the break even point and with a profit of 1`500 CHF?
- Value for Break even Point
- Value for Profit
-
PI = 0,
for break even point -
PI = 1`500,
for profit of 1500 CHF
What is the difference between contribution income statement and functional Income Statement? (4)
- Cost classification according to, ..
- Type of Margin
Which of the following variable and fixed components are also classified as cost of good sold?
- Direct materials
- Direct labor
- Variable manufacturing overhead
- Variable selling and administrative cost
- Fixed manufacturing overhead
- Fixed selling and administrative costs
- Direct materials
- Direct labor
- Variable manufacturing overhead
- Variable selling and administrative cost
- Fixed manufacturing overhead
- Fixed selling and administrative costs
What is the break-even point?
Total Revenue = Total Costs
What happens if the company operates below and above break-even?
- Below: Loss
- Above: Profit
How do you calculate the contribution margin per unit?
Contribution margin per unit
= Sales price per unit - variable costs per unit
How do you calculate the contribution margin ratio?
- Definition
- two ways to calculate it
It represents the portion of sales revenue that is available to cover fixed costs and contribute to profit.
Contribution margin ratio
- = Contribution margin per unit / Sales price per unit
- = 1 - Percentage of sales for variable costs
How do you calculate the
break-even volume (unit sales)?
Break-even volume
= Fixed costs /
Contribution margin per unit
(Sales price per unit - variable costs per unit)
What does operating leverage? Definition
Measures the degree to which an organization’s costs are fixed
How do you determine the before-tax profit?
Before-tax profit
= After-tax profit
/ (1 - tax rate)
How do you calculate
DOL Degree of Operating Leverage?
DOL
- = Contribution Margin / Operating Income
- = Q (P – V) / Q (P – V) – F
Q = number of units.
P = price per unit.
V = variable cost per unit.
F = fixed costs.
What does a
high degree of operating leverage signal?
A lot of fixed costs
How to calculate profit of a product, service or event?
How to calculate Revenue?
How to calculate total cost for a time period?
Cost-Volume-Profit (CVP) Analysis
- Give the main components? (4)
- Fixed Costs
- Variable Costs
- Volume
- Selling Price
What is the Basic Cost-Volume-Profit (CVP) Equation?
Profit
= (Selling Price × Volume)
− (Variable Cost per Unit × Volume)
− Fixed Costs
What are the assumption made for Cost-Volume-Profit (CVP)? (3)
Constant …
- selling price, per unit
- variable cost, per unit
- total fixed costs
How to calculate Contribution Margin (per Unit)?
Contribution Margin
= Selling Price - Variable Cost per Unit
How to calculate the
Break-Even Point
(in units)?
Break-Even Point (in units)
= Fixed Costs / Contribution Margin per Unit
What is the Profit-Volume (P-V) Graph?
Graphical representation showing relationships between
- sales volume,
- costs,
- profits.
What does the Sensitivity Analysis look for? (2)
Examining how, ..
- changes in key variables
- impact profitability
What is a topic for Margin of Safety? (2)
Difference between, actual/expected sales break-even point.
Cost-Volume-Profit (CVP) Analysis
What are the Applications? (5)
-
P roduction
level determination -
P ricing
strategies -
I mpact
assessment of cost structure changes -
F easibility
evaluation for new products or services. -
Decision
-making
