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Chapter 18 - Weyg_Mgrl_4e_Ch05_SM_Final

# Chapter 18 - Weyg_Mgrl_4e_Ch05_SM_Final - CHAPTER 5...

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CHAPTER 5 Cost-Volume-Profit ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Distinguish between variable and fixed costs. 1, 2, 3, 6 1 1, 2, 3, 4, 5, 6 1A 1B 2. Explain the significance of the relevant range. 4, 5 2 2 3. Explain the concept of mixed costs. 6, 7, 8 1, 3, 4, 5 1, 3, 4, 5, 6 1A 1B 4. List the five components of cost-volume-profit analysis. 9 7 5. Indicate what contribution margin is and how it can be expressed. 10, 11, 17 6, 7 8, 9, 10, 11, 12, 13 1A, 2A, 3A, 4A, 5A 1B, 2B, 3B, 4B, 5B 6. Identify the three ways to determine the break-even point. 12, 13, 14 8, 9 8, 9, 10, 11, 12, 13, 14, 16 1A, 2A, 3A, 4A, 5A 1B, 2B, 3B, 4B, 5B 7. Give the formulas for determining sales required to earn target net income. 16 10, 12 14, 15 2A, 5A 2B, 5B 8. Define margin of safety, and give the formulas for computing it. 15 11 16 2A, 4A, 5A 2B, 4B, 5B © 2008 For Instructor Use Only 5-1

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ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income. Simple 20–30 2A Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income. Moderate 30–40 3A Compute break-even point under alternative courses of action. Simple 20–30 4A Compute break-even point and margin of safety ratio, and prepare CVP income statement before and after changes in business environment. Moderate 20–30 5A Compute contribution margin, fixed costs, break-even point, sales for target net income, and margin of safety ratio. Moderate 20–30 1B Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income. Simple 20–30 2B Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income. Moderate 30–40 3B Compute break-even point under alternative courses of action. Simple 20–30 4B Compute break-even point and margin of safety ratio, and prepare CVP income statement before and after changes in business environment. Moderate 20–30 5B Compute contribution margin, fixed costs, break-even point, sales for target net income, and margin of safety ratio. Moderate 20–30 © 2008 For Instructor Use Only 5-2
BLOOM’S TAXONOMY TABLE © 2008 For Instructor Use Only 5-3

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ANSWERS TO QUESTIONS 1. (a) Cost behavior analysis is the study of how specific costs respond to changes in the level of activity within a company. (b) Cost behavior analysis is important to management in planning business operations and in deciding between alternative courses of action. 2. (a) The activity index identifies the activity that causes changes in the behavior of costs. Once the index is determined, it is possible to classify the behavior of costs in response to changes in activity levels into three categories: variable, fixed, or mixed.
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