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finance exercise Wk 4 assignment

# finance exercise Wk 4 assignment - Finance Exercise Finance...

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Finance Exercise 1 Finance Exercise Week Four University of Phoenix FIN/324 Financial Analysis For Managers I

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Finance Exercise 2 Finance Exercise Week Four 9. What is the basic C-V-P equation? What is a more detailed version of this equation? The basic equation for the C-V-P is sales revenue-variable costs-fixed cost=profit A precise version of the equation is (sales price x units) – (variable costs x units) – fixed costs = profit 10. What is the contribution margin, and why is it important for managers to know the contribution margins of their products? The contribution margin is the revenue available to cover the fixed costs of the product and provide a profit to the business. The contribution margin provides the manager with the profitability of products assisting managers in planning 11. How much will profits increase for every unit sold over the break-even point? Profits increase by 100% once the break-even point has been reached 12. What is the major advantage of using C-V-P graphs? The graphs provide a visual understanding of the results of C-V-P calculations and are considered the most efficient method of explaining and understanding the data. 13. When other factors are constant, what is the effect on profits of an increase in fixed costs? Of a decrease in variable costs? Profits will decrease when the fixed costs increase and all other factors are constant. The company will need to sell more units of a product or service to remain at the target income and remain at the same profit margin. A decrease in variable costs will result in an increase of profit. 14. What are the limiting assumptions of C-V-P analysis? C-V-P is limited by the time fixed and variable cost change and requires periodic adjustments.
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