2877106
Description
Flashcards by Tshilidzi Thathaisa, updated more than 1 year ago
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Created by Tshilidzi Thathaisa
over 9 years ago
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| Question | Answer |
| SALES | *CONTRIBUTION + VC *AS A % OF NET PROFIT *BREAK-EVEN(BE) + MARGIN OF SAFETY(MOS) |
| BREAKEVEN (BE) | =FIXED COST/CM%>>>TOTAL =FIXED COSTS/CM>>>UNITS |
| MARGIN OF SAFETY & MARGIN OF SAFETY RATIO | MOS=SALES-BE MOS%=(SALES-BE)/SALES |
| NET PROFIT | =MOS X CM% |
| CONTRIBUTION MARGIN & CONTRIBUTION MARGIN RATIO | =SALES-TVC =CONTRIBUTION/SALES |
| OPERATING LEVERAGE | DEF: The sensitivity of net profit to changes in sales =CONTRIBUTION/PROFIT>>>FACTOR e.g. sales change by 25% change in profit=FACTOR X 25% *the higher the leverage the higher the sensitivity |
| BREAK-EVEN FOR ENTITIES WITH MORE THAN ONE PRODUCT | 1. DETERMINE SALES MIX 2.DETERMINE SEPERATE CONTRIBUTION 3.COMBINE THE CONTRIBUTIONS BASED ON SALES MIX RATIO eg. x+2y [sum Total contribution/sum of units=avrg contri] 4. calculate BE |
| State the ASSUMPTIONS of CVP | Single product or constant sales mix Complexity related fixed costs do not change Profits are calculated on a variable costing basis Total costs and total revenue are linear functions of output The analysis applies to the relevant range only Costs can be accurately divided into their fixed and variable elements. |
| LINEAR PROGRAMMING ASSUMPTIONS | Linearity (constant contribution per unit of output) • Perfect divisibility of outputs and inputs • Relationships may be expressed as linear formulas • All costs vary with a single volume-related output measure, or are otherwise fixed. • Short-term focus (constraints consist over the short term) • The products produced are not produced in a fixed combination |
| how do you intrepret risk based on standard deviation | the higher the risk the higher the standard deviation. |
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