Advanced Cost Volume Profit Analysis
Multi-product Cost Volume Profit Analysis
CVP terms & concepts
CM format income stmt
Grab-bag
100
It's the amount by which current or projected sales exceed the break-even point.
What is the margin of safety?
100
It's the name for the relative combination of products being sold by a firm. (Not the "package.")
What is sales mix?
100
It's a fixed cost.
What is a cost that doesn't vary in total due to changes in output levels.
100
Contribution margin divided by sales.
What is the CM ratio?
100
This Soviet satellite was the first man-made object to orbit the earth.
What is Sputnik 1?
200
It measures the percent change in operating income that will result from a certain percent change in sales.
What is degree of operating leverage?
200
The Parker Company sells two products, the Zack and the Tyler. The Zack has a CM of $25 per unit. The Tyler has a CM of $40 per unit.
If Parker's sales mix shifts towards the Zack, it'll have this effect on the company's break-even point.
What is an increase?
200
Visual clue #1.
Click here.
What is a mixed cost?
200
If sales increase by X dollars, the CM will increase by this number of dollars.
What is the CM ratio times X dollars?
200
It's the Maryland retreat used by presidents of the United States.
What is Camp David?
300
Mulally Co. has a CM of $100,000 and a NOI of $25,000.
A 25% decrease in sales will result in this change in net income.
What is a 100% decrease?
300
Parker Company sells the following products:

Zack: CM/unit = $25
Tyler: CM/unit = $40
If fixed costs are $120,000 per year and the company sells 5 Zacks for every Tyler, what is the "package" contribution margin for Parker?

What is $165?
300
Visual clue #2
Click here.
What is a profit line?
300
If sales increase by X dollars, operating income will increase by this amount.
What is the CM ratio times X dollars?
300
Using this pen name, Charles Dodgson wrote "The Jabberwocky" and "Alice's Adventures in Wonder-land."
Who is Lewis Carroll?
400
Smith Company and Krzyzewski Company operate in the same industry. Smith Company has a higher degree of operating leverage than does Krzyzewski Company. From this we can conclude that Smith Company's managers have this level of confidence about their future sales projections.
What is "high" (or "higher than Krzyzewski Company")?
400
Parker Company sells the following products:

Zack: CM/unit = $25
Tyler: CM/unit = $40
If fixed costs are $120,000 per year and the company sells 5 Zacks for every Tyler, how many "packages" must be sold to generate a target profit of $45,000?

What is 1,000 packages?
400
An increase in variable cost per unit will have this effect on break-even point.
What is increase?
400
It's the net income for visual clue #3.
Click here.
What is $15?
400
In October 1517, he posted his "95 Theses" to the door of the Wittenberg Castle Church.
Who is Martin Luther?
500
Vincent's Cappuccino Express currently has the following cost structure: $300 per month plus $0.10 per cup.
Vincent can pay his employees on straight commission, which would change the cost function to $200 per month plus $0.50 per cup.
At this level of sales volume, the two cost functions give equal levels of profitability.
What is 250 cups per month?
500
Head-first Company sells helmets.
Bike helmets sell for $70 and have a VC of $49 each.
Motorcycle helmets sell for $220 and have a VC of $143 each.
If total FC are $54,600, and the ratio is 5 bike helmets to 1 motorcycle helmet, name the break-even point in "packages."
What is 300 packages?
500
Nutri-Pak sells whole-grain snacks. A snack-pak sells for $5, with a VC of $2. Nutri-Pak has total FC of $10,000 per month.
Monthly sales volume for Nutri-Pak is 5,000 snack-packs.
This is Nutri-Pak's degree of operating leverage.
What is three?
500
The Parker Company sells two products, the Zack and the Tyler. The Zack has a CM of $25 per unit. The Tyler has a CM of $40 per unit.
Parker sells three Zacks for each Tyler.
This is the CM of the "package."
What is $115?
500
He is currently the Secretary-General of the United Nations
Who is Ban Ki-Moon?
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