CVP Analysis Planning and Decision Making:

a. Given the following formulas, which one represents the break-even sales level in units? P = Selling price per unit; F = Total fixed costs; V = Variable cost per unit.

b. Which of the following assumptions is not made in break-even analysis?

(1) Volume is the only factor affecting cost. (2) No change between beginning and ending inventory. (3) The sales mix is maintained as volume changes. (4) All of the above are assumptions sometimes required in break-even analysis.

c. A company increased the selling price for its products from $1 to $1.10 a unit when total fixed cost increased from $400,000 to $480,000 and variable cost per unit remained the same. How would these changes affect the break-even point?

(1) The break-even point in units would be increased. (2) The break-even point in units would be decreased. (3) The break-even point in units would remain unchanged. (4) The effect cannot be determined from the given information.

Transcribed Image Text:

(1) F P-V P (2) (3) FV F V+ P V (4) P-F P (5) F