Required sales in pesos to meet a target net income is computed by dividing A. Fixed costs plus target net income by contribution margin per unit. B. Variable costs plus target net income by contribution margin per unit. C. Fixed costs plus target net income by contribution margin ratio. D. Total costs plus target net income by contribution margin ratio.

Chapter 3- CVP Cost-volume-profit (CVP) analysis requires an understanding of cost behavior: variable and fixed costs. Cost behavior differs from the GAAP-based financial reporting focus: product and period costs. The two ways to categorize costs results in TWo different income statements: Absorption costing income statement: S-C-GM-SA-NI (Key assumption: Split costs into product and period costs) Variable costing income statement: S-VE-CM-FE-NI (Key assumption: Split costs into variable and fixed) 1. 2. Absorption Costing Income Statement Variable Costing Income Statement Sales $500,000 Sales $500,000 Less: Variable expenses Less: Cost of goods sold: Variable (DM+DL+VOH) Fixed (FOH) Gross margin 100,000 Product costs 100,000 60,000 S&A costs 110,000 340,000 Contribution margin 290,000 Less: Fixed expenses Less: Selling & administrative Variable 110,000 Product costs 60,000 Fixed 140,000 S&A costs 140,000 Taxable income $90,000 Taxable income $90,000 LINK THE LINEAR COST FUNCTION TO…

Which of the following equations is correct for determining the required sales in units to generate a targeted amount of pre-tax income (πB) under the equation method (where Q = sales in units, F = total fixed costs, πB = pre-tax profit, v = variable cost per unit, and p = selling price per unit)?

Fill in the missing amounts in each of the eight case situations below. Each case Is Independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format Income statement for each case, enter the known data, and then compute the missing items.) Required: a. Assume that only one product is being sold in each of the following four case situations: Unit sold Sales Variable expenses Fixed expenses Operating income (loss) Contribution margin per unit Sales Variable expenses Fixed expenses $ Operating income (loss) Average contribution margin (percentage) Case #1 20,400 244,800 163,200 68,000 $ $ 136,000 $ 10 Case #2 $ Case #1 536,000 43,520 10.880 $ 8,800 20% 10 $ 69 Case #3 Case #2 13,600 b. Assume that more than one product is being sold in each of the following four case situations: (Enter "Contribution margin ratio" in percent. Round your final answers to the nearest whole dollar amount.) 436.000 283.400 109.000 95,200 16,320 13 $ S CA Case #4…

Change in operating income = change in sales dollars x contribution margin What is the equation for the "change in sales dollars"?

An analyst is constructing a simple model to determine the gross and net profit of a product, given its profit per unit, quantity sold, and the total costs assigned to the product. The calculation for gross profit is Profit per Unit times Quantity. The calculation for Net Profit is Gross Profit minus Total Costs. A B 1. 2 Profit per Unit 8 3 Quantity |10,100 4 Gross Profit 5 6 Total Costs 6,100 7 8 Net Profit With the values for Profit per Unit, Quantity, and Total Costs shown above, what should the model return for the following calculated cells? Cell Value Gross Profit Net Profit