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Instructions: Read and analyze each item very carefully and critically, then answer each question comprehensively. Provide theoretical, philosophical and legal bases/underpinnings to support your point/stand.
Instructions: Read and analyze each item very carefully and critically, then answer each question comprehensively. Provide theoretical, philosophical and legal bases/underpinnings to support your point/stand. Show clearly the solutions, if computations are needed to support answers. Problem Solving: Problem 1: Break-even point The summary of budgeted income statement of XYZ Gift Shop follows: Net Revenue P8,000,000.00 Less Expenses, including P4,000,000.00 of Fixed Expenses 8,800,000.00 Net Loss (800,000.00) The manager believes that an additional outlay of P2,000,000.00 for advertising will increase sales substantially. a. At what sales volume in pesos will the shop break-even after spending P2,000,000.00 on advertising? b. What sales volume in pesos will result in a net profit of P400,000.00 after spending the P2,000,000.00 on advertising? Problem 2: Cost-Profit Volume (CVP)Analysis: Making Managerial Decision Managers use CVP analysis to predict effects of changes in sales or costs on the break-even point. Using the following short formula, answer the questions that follows. a) BEVU (Break-even volume in units) = Fixed Expenses / Unit Contribution Margin b) BEVP (Break-even volume in pesos) = Fixed Expenses / Contribution Margin Ratio (Remember that the contribution margin per unit equals the sales price per unit less the variable costs per unit). 1. What would be the effect on the unit and peso break-even level if fixed costs increase (and there are no other changes)? 2. What would be the effect on the unit and peso break-even level if variable cost per unit decreases (and there are no other changes)? 3. What would be the effect on the unit and peso break-even level if sales volume increases (and there are no other changes)? Answer the following questions independently. 1. Explain how cost drivers affect cost behavior. 2. Differentiate between contribution margin and gross margin. 3. Distinguish between job-order costing and process costing. 4. Explain the major features and advantages of a Master Budget. 5. What is a cost driver? Give three examples of costs and their possible cost drivers
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