The monthly income statement for Jordan Stores is given below: 1st Branch 2nd Branch Total Sales ₱ 1,200,000 ₱ 800,000 ₱ 2,000,000 Less: Variable Expenses 840,000 360,000 1,200,000 Contribution Margin ₱ 0,360,000 ₱ 440,000 ₱ 0,800,000 Less: Traceable Fixed Expenses 210,000 180,000 390,000 Segment Margin ₱ 0,150,000 ₱ 260,000 ₱ 0,410,000 Less: Common Fixed Expenses 180,000 120,000 300,000 Profit (Loss) ₱ 0,( 30,000 ) ₱ 140,000 ₱ 0,110,000 What are the total common fixed expenses if 1st Branch is eliminated? Show solution Group of answer choices ₱ 210,000 ₱ 300,000 ₱ 120,000 ₱ 180,000
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
The monthly income statement for Jordan Stores is given below:
|
1st Branch |
2nd Branch |
Total |
|
|
Sales |
₱ 1,200,000 |
₱ 800,000 |
₱ 2,000,000 |
|
Less: Variable Expenses |
840,000 |
360,000 |
1,200,000 |
|
Contribution Margin |
₱ 0,360,000 |
₱ 440,000 |
₱ 0,800,000 |
|
Less: Traceable Fixed Expenses |
210,000 |
180,000 |
390,000 |
|
Segment Margin |
₱ 0,150,000 |
₱ 260,000 |
₱ 0,410,000 |
|
Less: Common Fixed Expenses |
180,000 |
120,000 |
300,000 |
|
|
₱ 0,( 30,000 ) |
₱ 140,000 |
₱ 0,110,000 |
What are the total common fixed expenses if 1st Branch is eliminated? Show solution
Group of answer choices
₱ 210,000
₱ 300,000
₱ 120,000
₱ 180,000
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