AA025 TOPIC 6 COST VOLUME PROFIT

Which of the following best describes the purpose of Cost-Volume-Profit (CVP) analysis?

• To determine the exact manufacturing cost of each product

• To examine how changes in costs and sales volume affect a company’s profit

• To record daily business transactions in the accounting system

• To calculate the depreciation of fixed assets

Which of the following is an assumption of Cost-Volume-Profit (CVP) analysis?

• Selling price per unit changes as sales volume increases

• Variable cost per unit remains constant within the relevant range

• Total fixed cost increases when production volume increases

• Units produced are always greater than units sold

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : Calculate break-even point in unit

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : Calculate break-even point in RM

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : Calculate margin of safety in unit

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : Calculate margin of safety in RM

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : If CSB want to get profit for RM500,000, calculate the targeted sales unit

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : CSB is expecting direct labour cost will increase in 5% while fixed sales cost increase for 10%. Calculate break-even point in unit

Crystal Sdn. Bhd (CSB) is producing a product named Biorita. The following are CSB budget information for 2009.

Sales price per unit RM50

Variable cost per unit:

    Direct material RM13, Direct labour RM9, Manufacturing overhead RM5, Sales expense RM3

Fixed production cost RM130,000

Fixed sales cost RM90,000

Forecasted sales for 2009 is RM1,500,000

REQUIRED : CSB is expecting direct labour cost will increase in 5% while fixed sales cost increase for 10%. Calculate break-even point in RM

Which of the following best explains the importance of Cost-Volume-Profit (CVP) analysis?

• To prepare financial statements in accordance with accounting standards

• To calculate the historical cost of inventory

• To determine the break-even point and the sales level required to achieve a target profit

• To record fixed and variable costs separately in the ledger