What are your weaknesses? DO respond with areas where you used to have problems, but have since fixed them.
After you have read and studied this chapter, you should be able to: Discuss the Managerial accounting question answers underlying the conventional linear cost-volume-profit CVP model. Explain the implications of relaxing each of these assumptions in terms of the theoretical cost- volume-profit model.
Explain the meaning of a series of graphic illustrations for both the linear and nonlinear CVP models including production functions, revenue functions and cost functions. Discuss the difference between performing a "what-if" analysis and converting from the linear model to the theoretical nonlinear model.
Solve a variety of linear CVP problems for single product companies in either units or sales dollars. Define and use the margin of safety. Solve a variety of linear CVP problems for multiproduct companies in either units or sales dollars.
Solve similar problems on a cash flow basis. Discuss the controversy concerning the compatibility of the contribution margin approach with activity based costing and the lean enterprise concepts of just in time and the theory of constraints.
To use the CVP model, a company must separate total costs into fixed and variable categories using one of the methods described in Chapter 3. Recall from our earlier discussions of these terms that variable costs are those costs that vary with changes in the level of activity.
The only activities that are allowed to affect variable costs in traditional cost-volume-profit analysis are production output and sales. Remember that fixed costs are those costs that do not vary with changes in the activity level.
Conceptually, fixed costs are not constant. By definition, fixed simply means that these costs are not driven by short run changes in production or sales volume. Although explicit recognition of non production volume related cost drivers is a key concept in activity based costing, the idea is ignored in the conventional linear CVP model.
Therefore, the short run emphasis of CVP analysis tends to conflict with the long run emphasis of activity based costing and the lean enterprise concepts of JIT and TOC.
This creates another thought provoking controversial issue. The purpose of this chapter is to describe the assumptions and techniques of the conventional linear cost-volume-profit approach as well as the controversy concerning the compatibility of CVP analysis with ABC and the continuous improvement concepts.
The chapter is divided into five main sections. The first section addresses the underlying assumptions of the conventional linear model and the implications of relaxing these assumptions. This section is mainly conceptual and is illustrated with a series of graphs.
The second section illustrates the basic planning techniques for a single product company that provide the foundation for more realistic problems.
The third section extends the basic analysis to multiproduct companies. Both sections two and three are more mechanical than conceptual and are mainly illustrated with a series of related equations. The fourth section is fairly short, but illustrates how to convert the analysis to a cash flow basis.
Since the CVP methodology is closely related to direct or variable costing, this chapter helps provide a better foundation for the more detailed comparison of direct and absorption costing presented in Chapter Constant variable cost per unit.
Constant total fixed cost. Units sold equal units produced. Note that these are the same assumptions that are applicable to the master budget, with the exception of number five. Now we will examine the implications of each assumption. Constant Sales Price To assume that the sales price is constant implies that the company is facing a horizontal demand function as illustrated in Figure The implications of a horizontal demand function are that the company can sell any number of units at a constant sales price.
Another way to describe this is to say that consumers are willing and able to buy any quantity the company offers for sale at a constant price.
Average revenue AR is constant and equal to the sales price, i. The slope of the total revenue function see Figure is equal to the sales price.
When the company sells one additional unit, total revenue increases by an amount equal to the sales price of that unit. The fact that the sales price is constant causes the slope of the total revenue function to be constant which results in a linear total revenue function.
Another way to describe this is to say that total revenue increases at a constant rate as additional units are sold. A more realistic down sloping demand function see Figure illustrates what economists refer to as the law of demand.Managerial Accounting question: Need help doing out this work Perfect Printing is a company that contracts with book publishers to produce the physical books that are then sold to stores.
They provide printing services at a lower price than it costs the publishers. In this article, you will learn and familiarize yourself with the accounting principles and accounting concepts relevant in performing the accounting procedures. It is relevant to understand it because you need to abide by these concepts and principles every time you analyze record, summarize, report and interpret financial transactions of a business.
This is a Sample PDF of our Managerial and Cost Accounting Exam You can view the entire Exam (81 pages containing questions plus answers) when you join AccountingCoach PRO. kaja-net.com is the place to go to get the answers you need and to ask the questions you want. How People Avoid Making Serious Decisions In The Histories, written in B.C., Herodotus makes the following statement: "If an important decision is to be made [the Persians] discuss the question when they are drunk and the following day the master of the house submits their decision for reconsideration when they are sober.
Below is the Management Information Systems (MIS) Question Bank with Answers Hint. There are total eight units covered.
Blanchard Company manufactures a single product that sells for $ per unit and whose total variable costs are $ per unit. The company’s annual fixed costs are $, Management Accounting: Concepts, Techniques & Controversial Issues Chapter 11 Conventional Linear Cost-Volume-Profit Analysis. James R. Martin, Ph.D., CMA Professor Emeritus, University of South Florida. MAAW's Textbook Table of Contents. Feb 19, · I've literally tried everything. What are we multiplying the percentages by? Any help is appreciated. Thanks in advance! Assigning Costs to Activities, Resource Drivers The Receiving Department has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leased for $15, per year. The forklift is Status: Open.
These question may help you in university or institute exam preparation.