COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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To find the target sales volume in sales value, we use the contribution margin per unit instead of contribution sales ratio.
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True
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False
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Explanation:
Detailed explanation-1: -Since you have the contribution margin ratio, you must identify the variable cost ratio and use that figure to determine the total sales. To do so, subtract the contribution margin ratio from 100 to determine the variable cost ratio, and then divide the variable cost amount by that percentage.
Detailed explanation-2: -The answer is b. Contribution margin is the difference between fixed and variable expenses.
Detailed explanation-3: -How Do You Calculate Contribution Margin? Contribution margin is calculated as Revenue-Variable Costs. The contribution margin ratio is calculated as (Revenue-Variable Costs) / Revenue.
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