COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A business manufactures a single product which it sells for $50. The variable costs of production are $10 a unit. Next month fixed costs will be $800, 000. The Finance Director wants to realise a profit of $120, 000. How many units must be sold to generate this profit?
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21000
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23000
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22000
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None of these
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Explanation:
Detailed explanation-1: -The contribution margin is sales minus variable costs (80, 000-20, 000) = 60, 000. Then, 60, 000/80, 000=75%.
Detailed explanation-2: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.
Detailed explanation-3: -First, add up all of your production costs. Make sure to be clear about which costs are fixed and which ones are variable. Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.
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