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CVP/ breakeven (question)

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › CVP/ breakeven (question)

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by Ken Garrett.
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  • Author
    Posts
  • August 26, 2016 at 2:58 pm #335343
    Xinxin Lee
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    E plc operates a marginal costing system. For the forthcoming year, variable costs are budgeted to be 60% of sales value and fixed costs are budgeted to be 30% of sales value.

    If E plc increases its selling prices by 10%, and if fixed costs, variable costs per unit and sales volume remain unchanged, the effect on E plc’s contribution would be:

    A . a decrease of 6%
    B . an increase of 10%
    C . an increase of 25%
    D . an increase of 100%

    I was work it out of this answer, is it correct?
    Before;
    Sales price 100
    Variable cost 60
    ——-
    Contribution 40
    ——–

    After;
    Sales price 110
    Variable cost 60
    ———
    Contribution 50
    ———
    B .The increase in contribution from 40 to 50 is an increase 10%.

    August 30, 2016 at 5:19 pm #336340
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10583
    • ☆☆☆☆☆

    An increase from 40 to 50 is a 25% increase:

    40 x 1.25 = 50

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