Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit. Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows: Contribution margin = Sales - Variable cost. Similarly contribution margin ratio = Contribution/sales To prepare: The Complete table

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 4.1GAP

To determine

Concept introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:

Contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

To prepare:

The Complete table

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Which of the following statements is true with respect to the degree of operating leverage (DOL)? Multiple Choice It is calculated as the ratio of contribution margin (CM) to operating income, at each level of output. It can be calculated and used by manufacturing but not service firms. For most firms, it is relatively constant in amount as sales volume changes. It is calculated as the amount of operating income × (1 − t), where t = the income tax rate. It provides a simple way to estimate the change in total fixed cost for a given change in sales volume.

Encircle the followings: Which of the following is a definition of break-even point?a) The difference between the selling price of a product and the variable costs incurred in producing that productb) The fixed plus variable costs of the businessc) The situation where neither a profit nor a loss is maded) The situation where a profit is made If the contribution per unit is $25 and the breakeven point is 80,000 units. Which of the following statements could NOT be true? (Show Calculation) a) The selling price per unit is $55 and the variable cost per unit is $30b) The fixed costs are $2,000,000c) To make a profit of $300,000, 92,000 units would have to be soldd) To make a profit of $500,000, 95,000 units would have to be sold Which of the following is not an underlying assumption of break-even analysis?a) Costs can easily be divided into fixed and variable.b) Fixed costs remain static over a relevant range.c) The unit selling price will remain constant throughout the relevant…

a. Given the following graphs, calculate the total fixed costs, variable costs per unit, andsales price for Firm A. Firm B’s fixed costs are $120,000, its variable costs per unit are$4, and its sales price is $8 per unit.b. Which firm has the higher operating leverage at any given level of sales? Explain.c. At what sales level, in units, do both firms earn the same operating profit?