• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

PQ Awards Nominations

Please help us to win one of the PQ Magazine awards and send in the voting form >>
You can nominate us in any or all of the following categories: Online College of the Year, Study Resource of the Year, Private Sector Lecturer of the Year, and Accountancy Personality of the Year.

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

CVP ANALYSIS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › CVP ANALYSIS

  • This topic has 1 reply, 2 voices, and was last updated 8 months ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 6, 2022 at 10:41 am #657509
    Tumelo3
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    A business is considering changing its fixed cost to variable cost mix (its operational gearing),
    by encouraging some staff to agree to be paid for the hours they actually work, rather than
    being fully employed on salaries. If they make this change the C/S ratio will reduce from 0.6
    to 0.45 but the fixed cost base will drop 20% to $720,000 in total.
    What will be the effect on the breakeven point in revenue terms and the risk profile of the
    business?
    A The BEP will increase by $100,000 and the risk profile will worsen
    B The BEP will increase by $100,000 and the risk profile will improve
    C The BEP will reduce by $100,000 and the risk profile will worsen
    D The BEP will reduce by $100,000 and the risk profile will improve

    Existing BEP = 900,000/0.6 = $1,500,000 New BEP = 720,000/0.45 = $1,600,000

    Sir please help me get how Existing fixed costs of $900,000 were worked out

    June 6, 2022 at 3:59 pm #657535
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    The question says that the fixed costs will drop by 20%, which means that they will then be 80% of what they were.

    Given that they are dropping to 720,000, it must therefore be that before they are 720,000/80% = $900,000.
    (And, of course, it checks. Reduce 900,000 by 20% of 900,000 and you get 720,000 🙂 )

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • John Moffat on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • John Moffat on PM Chapter 13 Questions Standard Costing and Basic Variance Analysis
  • abdallah254 on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures
  • Iby2012 on Introduction to Financial Accounting – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy