Cost II (Chapter 1)
Individual Assignment on CVP analysis and decision making Write true if the statement is correct and write false if the statement is wrong
1. The difference between total revenues and total variable costs is called gross margin
2. Income taxes can be incorporated into CVP analysis by using target net income rather than target operating income
3. When CVP analysis is applied to a multiple-product company it is assumed that there is a constant sales mix of products as the total quantity of units sold changes.
4. The breakeven point is unaffected by the presence of income taxes because no income taxes are paid if there is no operating come.
Fill in the blank spaces with appropriate words or phrases
1-----is examines the behavior of total revenues, total costs and operating income as changes occur in the output level, selling price, variable costs per unit or fixed costs.
per unit.
2.-----is the difference between the unit selling price and the variable cost
3.--------(also called contribution margin ratio) is the contribution margin per unit divided by the selling price.
4.------The-------is that quantity of output where total revenues equal
total costs-that is, where the operating income is zero.
Instruction, Students, please work out the following questions by showing the necessary steps
Problem 1 Naflet Company produces a single product that it sells wholesale for Br.100 per unit.
Variable costs per unit amount to Br.80 and total fixed costs are Br.100, 000. Assume the applicable tax rate is 40%.
Required
a) Find the break-even point in sales Birr.
b) Find the sales Birr needed to generate Br.20, 000 in net income before taxes.
c) Find the sales dollars needed to generate Br.24, 000 in net income after taxes.