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April 15, 2018 at 10:37 am
In the first question, I could not understand how Sales per unit is calculated? There is $28/70%=$40 as Selling price calculated. Could you please explain how is this done?
John Moffat says
April 15, 2018 at 3:24 pm
If the contribution is 30% of sales, then the variable cost must be 70% of sales.
The variable costs = 28 = 70% x sales. Therefore sales = 28/70%
April 16, 2018 at 3:41 pm
Thank you so much sir!
April 16, 2018 at 4:27 pm
You are welcome 🙂
May 2, 2018 at 4:35 pm
How is the variable cost 70% of sales?
May 3, 2018 at 6:01 am
Contribution is sales less variable costs. So if contribution is 30% then variable costs must be 70%.
July 30, 2017 at 10:45 am
Hi Sir 🙂
In the end of last question we divide calculated total contribution by previous budgeted contribution per unit and there were previous absorption of fixed in this budgeted contribution per unit. I have question, why don,t we change absorption of fixed cost for unit of prod x? Shoudn’t we absorbe all fixed (without 6000 specyfic for y ) as we product and sell only x?
July 30, 2017 at 10:51 am
sorry in 4th question 🙂
July 30, 2017 at 6:28 pm
This question related to CVP analysis and therefore we need to know the contribution per unit for X, and the total contribution that is required (which is the profit required of 144,000 plus the total fixed costs). The total fixed costs will be as per the budget but less the specific fixed costs that relate to Y. We do not need to re-absorb and calculate a new profit per unit for X.
Have you watched the free lectures on CVP analysis?
August 1, 2017 at 6:48 pm
You are totaly right contribution will be the same because contribution per unit is constant. Sorry ?
August 2, 2017 at 7:19 am
No problem 🙂
July 16, 2017 at 3:59 am
Hi, I don’t understand in Q3 &Q5 why fixed cost is total contribution? In Q3, it mentioned fixed cost is $80000, the answer write that contribution also $8000. Same as Q5
July 16, 2017 at 10:06 am
I don’t think you have watched the free lectures on CVP analysis (and there is no point in attempting the tests without watching the lectures first).
Breakeven is when the profit is zero, and for zero profit the total contribution must be equal to the fixed costs.
July 7, 2017 at 5:30 pm
in question 5, i do not understand how you calculated total contribution= $375000 $375000 is the fixed cost in question. please help me to understand this
July 8, 2017 at 9:58 am
For breakeven, the contribution must equal the fixed costs (and therefore the profit will be zero).
I do suggest that you watch the free lectures on breakeven analysis where this is explained.
June 26, 2017 at 3:52 pm
hallo, i would like to ask why fixed cost for product X was calculated by adding fixed cost of Y to fixed cost of X, when we focus on product X only.
June 27, 2017 at 6:49 am
Because, by definition, the total fixed costs will not change whatever they end of producing (except for the overheads that are specific to Y – they will not be incurred if Y is not produced).
January 16, 2017 at 9:36 am
For question 1 why is selling price 28/70% ?
February 5, 2017 at 3:58 pm
The contribution is 30% of the selling price. Therefore the variable costs must be 70% of the selling price.
If variable cost = 70% x SP, then the SP = variable cost / 70%.
October 16, 2016 at 3:41 pm
Mr John Moffat just one word of appreciation *Thank You*
April 1, 2016 at 3:05 pm
Pls explain the question 3, Why does the statement 1 not true and the statement 2 true? I don’t understand. Thank you very much, Thao Huyen.
April 1, 2016 at 6:15 pm
Statement 1 is not true, because a profit volume chart shows the profit against the sales (not the contribution against breakeven).
Statement 2 is true because a breakeven chart shows the costs and the revenues as straight lines and this is only the case if we assume there is a constant mix.
April 6, 2016 at 2:30 pm
Thanks you very much 🙂
April 7, 2016 at 6:39 am
March 24, 2016 at 1:20 pm
HI JOHN QUESTION 4 PLEASE contribution per uint from x= (7.68 + 2.88 ) = 10.56 a) i want to ask why and where 2.88 was added b) how and where we got this figure 196,800
thanks a lot.
March 28, 2016 at 8:16 am
Contribution is, by definition, the profit before fixed overheads (which is the same as selling price less variable costs). $2.88 is the fixed overhead per unit.
$196,800 is the total contribution required to give a profit (after $52,800 fixed overheads ) of $144,000.
I do suggest that you watch he free lectures where all of this is explained.
March 16, 2017 at 9:33 am
Hi John I have just use the formula to obtain CM per unit as (Selling price/unit less Variable cost per unit and get the same answer am i correct??)
March 16, 2017 at 4:49 pm
That’s fine (although it is quicker to add the fixed costs to the profit, and in some questions you might not have the choice).
Nobody will look at your workings for the MCQ’s – a computer marks the answer – and so how you arrive at the solution does not matter.
March 24, 2016 at 12:30 am
Hi , please is there anything like negative contribution per unit??. Please what is total contribution when selling price per unit is 4 and variable cost per unit is 4.2. Units produced is 50,000 units. Lastly will a negative total contribution be deducted from the other positive total contribution wen finding a weighted average contribution?? Thanks
March 24, 2016 at 6:48 am
Certainly if the variable costs were more than the selling price, then the contribution would be negative.
However if that were the case then you would not produce that product! 🙂
March 24, 2016 at 8:58 am
March 24, 2016 at 11:11 am
February 24, 2016 at 8:36 am
C/S ratio= 33.33%; Fixed costs = 30,000; target total contribution = $20,000. Sales revenue to earn target contribution = 1/33.33 x $20,000 = $60,006. (I got this correct)
Now.. the problem in the question increased both the fixed costs to $100,000 and target total contribution to $200,000. I have no idea on how to find the sales revenue required to achieve the new target contribution.
Here is the model solution: 1/38.6 x $200,000 = $518,135.
Why and how did the C/S ratio increase? I don’t see how the increase of fixed costs could lead to an increase of C/S ratio as well. Please help me out!
February 24, 2016 at 11:18 am
I am sorry but I have no idea which question you are talking about – it is not one of these practice questions.
Please ask in the Ask the Tutor Forum and give the full question.
February 25, 2016 at 5:09 am
Oh I’m sorry! I’ll do just that.
December 26, 2015 at 7:54 am
Hi sir,would like to ask Q4 of this test. The question states that fixed o/head includes apportioned general head cost.Is’nt apportioned o/head a non-cash,therefore irrelevant in decision making?Thanks
December 26, 2015 at 11:16 am
The general fixed overheads will still be incurred and will still need to be covered by the contribution. Only the overheads specific to Y will be saved.
This is a question on break even analysis (not on relevant costing)
November 26, 2015 at 7:42 pm
Hi Sir, Is it possible to write the workings for question 4 of 5 of the practice test of cost volume profit analysis?
November 27, 2015 at 7:14 am
Try the test again – the workings will appear when you submit an answer (in a pop-up window).
November 24, 2015 at 12:07 pm
Hi, how i solve the question in unit? c/s ratio 30% , variable cost $28 , fixed cost $21,600 , target profit $60,000
November 24, 2015 at 3:16 pm
If the contribution is 30% of the sales, then the variable cost is 70% of sales. So for every $70 of variable cost, the contribution is $30.
Therefore if there is a variable cost of $28 per unit, the contribution must be 30/70 x $28 = $12 per unit.
The total contribution required = 21,600 + 60,000 = $81,600
Therefore they have to sell 81600/12 = 6,800 units.
November 23, 2015 at 12:29 pm
Hello Sir is it possible for you to provide me with the solutions for the questions?
November 23, 2015 at 1:30 pm
The software tells you whether your answer is correct or not.
If you mean the workings for the correct answer, then we are working on this. In the meantime you can ask here and I will give you the workings.
November 22, 2015 at 9:33 pm
How do you work out question 1 in this test?
November 15, 2015 at 8:24 pm
The link leads to the Chapter 1 MCQs…please, fix it
November 16, 2015 at 7:04 am
ok, reload the page, it should be OK now,
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