Managerial Accounting - Guide
Managerial Accounting
By Maher, Stickney and Weil 10e
CHAPTER 6
FINANCIAL MODELING FOR SHORT-TERM DECISION MAKING
Questions, Exercises, Problems, and Cases: Answers and Solutions
6.1 See text or glossary at the end of the book.
6.2 Operating profit = Sales revenue – Variable cost – Fixed cost
6.3 The unit contribution margin is the excess of the unit price over the unit variable costs. The total contribution margin is the excess of total revenue over total variable costs.
6.4 Assumptions:
1. Revenues change proportionately with volume.
2. Variable costs change proportionately with volume.
3. Fixed costs do not change at all with volume.
(Other assumptions may include constant product mix and/or all CVP costs are expensed.)
6.5 Question Breakeven Point Unit Contribution Expected Margin Total Profit a. Raises. No Effect. Decreases. The contribution More of the margin (denom- contribution inator) is fixed margin while fixed costs must be (numerator) are used to increased. cover fixed costs. b. Lowers. Increases. Increases. A decrease in variable costs per unit in- creases contri- bution margin per unit. c. Lowers. Increases. Increases. Increasing sales price increases contribution margin. d. No Effect. No Effect. Increases. e. Raises. No Effect. Decreases. Increasing fixed More of the costs increases contribution breakeven point. margin must be used to cover fixed costs. 6.6 Total contribution margin: Selling price – variable manufacturing costs – variable nonmanufacturing costs = Total
By Maher, Stickney and Weil 10e
CHAPTER 6
FINANCIAL MODELING FOR SHORT-TERM DECISION MAKING
Questions, Exercises, Problems, and Cases: Answers and Solutions
6.1 See text or glossary at the end of the book.
6.2 Operating profit = Sales revenue – Variable cost – Fixed cost
6.3 The unit contribution margin is the excess of the unit price over the unit variable costs. The total contribution margin is the excess of total revenue over total variable costs.
6.4 Assumptions:
1. Revenues change proportionately with volume.
2. Variable costs change proportionately with volume.
3. Fixed costs do not change at all with volume.
(Other assumptions may include constant product mix and/or all CVP costs are expensed.)
6.5 Question Breakeven Point Unit Contribution Expected Margin Total Profit a. Raises. No Effect. Decreases. The contribution More of the margin (denom- contribution inator) is fixed margin while fixed costs must be (numerator) are used to increased. cover fixed costs. b. Lowers. Increases. Increases. A decrease in variable costs per unit in- creases contri- bution margin per unit. c. Lowers. Increases. Increases. Increasing sales price increases contribution margin. d. No Effect. No Effect. Increases. e. Raises. No Effect. Decreases. Increasing fixed More of the costs increases contribution breakeven point. margin must be used to cover fixed costs. 6.6 Total contribution margin: Selling price – variable manufacturing costs – variable nonmanufacturing costs = Total