COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Singer Inc. sells product E for P 5 per unit. The fixed costs are P 210, 000 and the variable costs are 60% of the selling price. What would be the amount of sales if Singer is to realize a profit of 10% of sales?
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P 700, 000
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P 525, 000
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P 472, 500
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P 420, 000
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Explanation:
Detailed explanation-1: -The key CVP formula is as follows: profit = revenue – costs. Of course, to be able to apply this formula, you need to know how to work out your revenue: (retail price x number of units). Plus, you need to know how to work out your costs: fixed costs + (unit variable cost x number of units).
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: -Fixed cost = Total cost of production-(Variable cost per unit x number of units produced)
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