COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Variable costs + Target net income.
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Variable costs + Fixed costs+ Target net income.
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Fixed costs + Target net income.
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No correct answer is given.
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Detailed explanation-1: -The required sales in units to achieve a target net income is: A. (sales + target net income) divided by contribution margin per unit.
Detailed explanation-2: -Multiply the expected number of units to be sold by their expected contribution margin to arrive at the total contribution margin for the period. Subtract the total amount of expected fixed cost for the period. The result is the target income level.
Detailed explanation-3: -To calculate the required sales level, the targeted income is added to fixed costs, and the total is divided by the contribution margin ratio to determine required sales dollars, or the total is divided by contribution margin per unit to determine the required sales level in units.
Detailed explanation-4: -Target Operating Income is defined as the Operating Income as budgeted in the Partnership Budget. If the actual Operating Income is equal to 80% of the Target Operating Income, no bonus shall be paid.