COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Teawalk Company is planning to sell 200, 000 units of product . The fixed costs are RM400, 000 and variable costs are 60% of selling price. In order to realize a profit of RM100, 000, the selling price per unit would have to be
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RM3.75
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RM4.17
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RM5.00
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RM6.25
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Explanation:
Detailed explanation-1: -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-2: -90000 and variable cost to sales is 75%, contribution is: Rs. 67500 Rs.
Detailed explanation-3: -Profit may be added to the fixed costs to perform CVP analysis on the desired outcome. For example, if the previous company desired a profit of $50, 000, the necessary total sales revenue is found by dividing $150, 000 (the sum of fixed costs and desired profit) by the contribution margin of 40%.
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