PM | CH 10 Cost-volume-profit analysis OTQs

A company makes and sells three products A,B and C. The following information has been provided:

General overhead costs absorbed using a unit absorption rate.

If the mix of products produced and sold is changed to 40%, 35% and 25%, what impact would this have on the weighted average contribution to sales ratio?

A company is manufacturing one product which it sells for $60 per unit. This product has a contribution to sales ratio of 35%.

Annual fixed costs are $31,500. The company is expecting a margin of safety of $60,000 based on the planned level of activity for the next year expressed in terms of sales value.

 What is the planned activity level (in units) for next year?

Jenny Co manufactures a single product which has a selling price of $45 and a variable price of $30 per. The annual budgeted sales volume is 300,000 and the annual fixed costs of $1,000,000.

The manager is considering reducing the price by $5 to stimulate sales. It is expected that annual profit will increase by 10%.

What volume of sales is required at the new selling price to increase profit by 10%?

A profit-volume chart can illustrate the relationship between:

Blent co is planning to invest in a new product which will improve its profitability and its related information is as follows:

Which of the following statements that relate to sensitivity of the investment is/are true?

The standard costs and revenues of Lee Co’s only product are as follows:

Fixed overheads are absorbed on budgeted production and sales of 15,000 units per year. Sales staff receive a sales commission of 10% of sales revenue (yet to be accounted for).

What is the margin of safety?

A company is producing single product. It is expected that when annual sales is $5.5 million, total costs amounts to $5.25 million. When annual sales are $5 million, total costs are $5.125 million.

What is the breakeven point for annual sales revenue?

KZR Co produces and sells a single product. Expected sales are $100,000, expected fixed costs are $45,000 and margin of safety is $35,000.

 What are the budgeted variable costs? (to the nearest $000)

Information about two products that a company is producing is as follows:

Fixed costs are budgeted to be $15,000

What is the minimum revenue required to breakeven?

Variable cost per unit represent 65% of a $ of sales and the fixed costs are $150,000. Budgeted revenue has been budgeted to be 5 times the amount of fixed costs.

What is the margin of safety % measured in revenue?

A company has budgeted sales revenue of $450,000 for December 20X5, with an associated contribution of $180,000. Fixed production costs are $125,500, and fixed selling costs amount to $30,500. 

What is the break-even sales revenue?

A company produces four products as follows:

What will be the order in which they would be drawn in a multi-product profit-volume chart?

A company produces two products, X and Y. these account for 65% and 35% of the total sales revenue of a company, respectively. As a percentage of sales revenue, variable costs are 50% for X and 70% for Y. total fixed costs are $150,500. There are no other costs.

What is the company’s break-even point?

Last year a company produced and sold 150,000 units at a total cost of $1,200,000. This year’s budget is for an increase in output to 230,000units at a total budgeted cost of $1,700,000. To accommodate the higher output levels fixed costs will rise by $90,000.

The budget selling price is $15.15.

What is the budgeted breakeven point (in units) for the company?

White Ltd produces and sells two products. The Sunny sells for $12 per unit and has a total variable cost of $7.90, while Bright sells for $17 per unit and has a total variable cost of $11.20. For every four units of Sunny sold, three of Bright are sold. White Ltd’s fixed costs are $131,820 per period.

Budgeted sales revenue for the next period is $398,500.

What is the margin of safety?

(ACCA PM March/June 2022)

Double Co provides a photocopying service for clients at a price of $0.10 per copy. It needs to choose which of two new photocopier models to rent. The costs of each photocopier model are given in the following table:

What is the minimum number of copies per year at which model S would be preferred to model T?

Anthony manufactures and sells a single product, Hid for $56 per unit. In January, budgeted volume was 7,200 units, the margin of safety was 26.2%.

The budgeted contribution to sales ratio is 21%.

What are the budgeted fixed costs for January?

Bluehit manufactures two products, X and Y. It has created a linear programming problem and formulated the objective function as follows:

Maximise contribution = 20x + 5y

Where X = Number of product X produced and Y = Number of product Y produced

Bluehit has determined that two materials, A and B, form the binding constraints. The constraints have been represented by the following formulae:

(A) 5x + 2y = 11,000 kgs

(B) 10x + 5y = 25,000 kgs

The solution to the linear programme formulation provided a contribution of $35,000.

However, a new market supplier for material A has been found and, although the supplier is more expensive than existing suppliers, this may alleviate the material A constraint.

What is the shadow price for material A?

Olivior is setting up a business printing newspapers and magazines. The following standard cost information is available:

Budgeted production 1,000 units per week 3,000 units per month

If newspapers and magazines are sold in their budgeted mix, what is the budgeted breakeven revenue?

A business is considering changing its fixed cost to variable cost mix (its operational gearing), by encouraging some staff to agree to be paid for the hours they actually work, rather than being fully employed on salaries.

If they make this change the C/S ratio will reduce from 0.6 to 0.45 but the fixed cost base will drop 20% to $720,000 in total.

What will be the effect on the breakeven point in revenue terms and the risk profile of the business?