1.
Cost-Volume-Profit Analysis (CVP Analysis):
CVP Analysis is a tool of cost accounting that measures the effect of variation on operating profit and net income due to the variation in proportion of sales and product costs.
Break-Even Point:
Break-even point is a point of sales where company can cover all its variable and fixed costs. It is a point of sales where revenue generated is equal to the total costs. Thus, profit is zero at this level of sales.
Contribution Margin Percentage:
Contribution margin percentage is the excess of selling price over variable cost demonstrated in percentage.
To compute: Break-even point.
2.
To compute: Total contribution margin and operating income when 175,000 units are sold.
3.
To compute: Total contribution margin and operating income when 175,000 units are sold.
4.
To explain: Comparison between break-even point in point 1 and 2. Lower break-even points are not always better.
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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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