Which of the following is not one of the assumptions for cost volume analysis?
Which of the following is not one of the assumptions for cost volume analysis?
Which one of the following is not an assumption of cost-volume-profit analysis? The behavior of costs is linear throughout the relevant range. All costs can be classified as either variable or fixed. Changes in activity and sales mix are the only factors that affect costs.
Which of the following is not considered in cost-volume-profit analysis?
analysis Which of the following is not considered in cost-volume-profit A. Total fixed costs are equal to revenue plus variable cost per unit times the B. C. quantity produced. Profit is equal to total fixed costs plus revenue. Total fixed costs are equal to profit minus revenue.
Which of the following are assumptions of cost-volume-profit analysis?
Contribution Margin per Unit. Which of the following is an assumption of CVP analysis? Only selling price, variable cost per unit, and total fixed costs are known and constant.
What are the three elements of cost-volume-profit analysis?
Classmate #1: The cost-volume profit analysis requires three vital elements to make an accurate result. Those elements are activity level, variable cost per unit, and the total fixed cost.
What are the components of cost volume profit CVP analysis?
The cost-volume-profit formula is:
- selling price−variable costs−fixed costs=profit.
- sales−variable expenses=contribution margin.
- profit=sales−variable expenses−fixed expenses.
What is the relationship between cost volume and profit?
The relationship between cost, volume and profit makes up the profit structure of an enterprise. Hence, the CVP relationship becomes essential for budgeting and profit planning.
Why is it important to determine a company’s break even point?
Break-even analysis is an important aspect of a good business plan, since it helps the business determine the cost structures, and the number of units that need to be sold in order to cover the cost or make a profit.
Which technique is used by managers to study the relationship between cost volume and profit?
Break-even analysis, a subset of cost-volume-profit (CVP) analysis, is used by management to help understand the relationships between cost, sales volume and profit. This techniques focuses on how selling prices, sales volume, variable costs, fixed costs and the mix of product sold affects profit.
What is the variable cost formula?
Total Variable Cost = Total Quantity of Output x Variable Cost Per Unit of Output.
What is fixed cost and variable cost with example?
Variable costs vary based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output. Fixed costs may include lease and rental payments, insurance, and interest payments.
Is direct labor a variable cost?
In accounting, variable costs are costs that vary with production volume or business activity. Fixed costs include various indirect costs and fixed manufacturing overhead costs. Variable costs include direct labor, direct materials, and variable overhead.
Why is direct labor a variable cost?
Since you will generally need to order more materials and pay for increased labor when you increase your company’s output, and purchase fewer materials and cut back on your employees’ hours when you slow production down, your direct labor and direct material costs are variable expenses.
Is factory supervision a fixed or variable cost?
The cost of providing supervision to workers is typically a fixed cost, because a company can usually keep its supervision overhead costs the same or similar despite normal production changes.
Is depreciation fixed or variable cost?
Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset. Depreciation cannot be considered a variable cost, since it does not vary with activity volume. However, there is an exception.
What is the formula for depreciation?
Sum of the Years’ Digits Depreciation Method
| Depreciation for the Year = (Asset Cost – Salvage Value) × factor | |
|---|---|
| 2nd year: | factor = (n-1) / (1+2+3+…+ n) |
| 3rd year: | factor = (n-2) / (1+2+3+…+ n) |
| … | |
| last year: | factor = 1 / (1+2+3+…+ n) |
Is Depreciation a standing charge?
Standing charges are fixed expenses which do not vary with the use of machine. Machine expenses are variable expenses which vary with running of machines, such as depreciation, repairs, power, maintenance, etc. Some accountants treat depreciation as a standing charge.
Is Depreciation a discretionary fixed cost?
Examples of committed fixed costs include depreciation of machinery, insurance of premises and machinery, rental of premises, maintenance costs etc. Examples of discretionary fixed costs include advertising costs, public relations expenses, employee training and development costs etc.
What would be an example of a discretionary fixed cost?
Examples of discretionary fixed costs include advertising, research, public relations, management development programs, and internships for students. Discretionary fixed costs can be cut for short periods of time with minimal damage to the long-run goals of the organization. Basically a fixed cost that isn’t long term.
What is a fixed discretionary expense?
A discretionary fixed cost is an expenditure for a period-specific cost or a fixed asset, which can be eliminated or reduced without having an immediate impact on the reported profitability of a business.
Which expense is considered a fixed discretionary expense?
A fixed expense is a period-specif expense, which means is and expense you paid over a fix time. If you think about, the definition of “fixed, discretionary expense” fits an entertainment subscription perfectly; therefore a music subscription service fee is a fixed, discretionary expense.
What are examples of discretionary expenses?
These include:
- Taxes.
- Employee salaries.
- Debts repayments (including loans and mortgages)
- Rent.
- Utility bills (including Internet costs)
- Inventory (especially for retail and other businesses that sell physical goods)
- Software that directly powers your business.
What are 2 examples of discretionary spending?
Some examples of areas funded by discretionary spending are national defense, foreign aid, education and transportation.
What is an example of a non discretionary expense?
Nondiscretionary expenses are things you must pay for or buy, including the following: Food. Rent or mortgage. Car payments.