Questions on Cost-Volume-Profit Analysis

constant over time. (Hint: You must consider likely changes in revenues and costs due to

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

Note: You can assume that variable costs are constant so that the average of them is the variable cost relevant for a change in sales.

Thirdly, since the total fixed costs account for 14.1% of its sales in the year of 1983 and 1984, we assume the total fixed costs will remain at this level until 1989. Similarly, the account receivable, account payable, and inventories stays at 10%, 5.5% and 4.5% of sales respectively.

CVP does allocate common costs and there are several examples of this. One example is the handling of costs of multifunction facilities such as the dams and reservoirs. These facilities provide flood control, store and supply water, and produce hydroelectric power, and the costs for these facilities are allocated among the purposes served. Other multi function

3. If a cost is identical under each alternative under consideration within a given decision context, the cost is considered:

* He has also assumed that the sales mix will remain constant. Total revenue and total expenses behave in a linear manner over the relevant range.

Question 3: Identify all costs associated with this venture. Categorize these costs as fixed or variable.

According to, Skills for Business Decisions, “Cost-volume-profit (CVP) analysis examines changes in profits in response to changes in sales volumes, costs, and prices.” (Kimmel P.D. 2009) A company’s profit is the CVP profit equation of Profit = Revenue – Expenses. A Cost-volume-profit (CVP) analysis consists of five basic components that include:

The case study also seems to take an assumption that every event is under the same scale hence the variable cost per event for similar expense category (such as table arrangement, floral, soft drinks and snacks costs, temporary staff wage, etc.) are having the same amount.

He has also assumed that the sales mix will remain constant. Total revenue and total expenses behave in a linear manner over the relevant range

Correct the EOQ and ROP quantities for each of the five items mentioned in the case.

3 variable costs indentified, they are power, operations, material. They are proportional to the revenue intake.

3. Assume that cost of goods sold for a company consists only of variable costs and gross margin is = (revenue – cost of goods sold)/revenue. Which of the following is true

Some of the assumptions of CVP as outlined by accountingformanagenment are: selling price is constant regardless of volume change, costs are linear, with multi-products the sales mix is constant, and manufacturing companies inventories do not change (N.D.). Because of the assumptions