CHAPTER 6 Cost Volume Profit Analysis Additional Issues Learning Objectives Questions Exercises Do It Exercises Problems Problems ASSIGNMENT CLASSIFICATION TABLE 1 Describe the essential features of a cost volume profit income statement 1 2 3 4 2 Apply basic CVP concepts 2 4 5 6 A B 1A 2A 1B 2B 1A 2A 6A 1B 2B 6B Brief 1 2 3 4 5 6 1 2 3 4 5 6 1 2 4 1 2 3 4 5 6 7 8 9 10 3 Explain the term sales mix and its effects on break even sales 4 Determine sales mix when a company has limited resources 7 8 9 7 8 9 10 3 4A 10 11 11 15 11 12 13 3A 4B 3B 5 Understand how operating leverage affects profitability 12 13 14 15 16 12 13 14 14 15 16 5A 6A 5B 6B 17 16 17 18 17 18 19 7A 8A 7B 8B 6 Explain the difference between absorption costing and variable costing 7 Discuss net income effects under absorption costing versus variable costing 19 20 21 22 19 8 Discuss the merits of absorption 18 versus variable costing for management decision making 18 7A 8A 7B 8B 8A 8B Copyright 2012 John Wiley Sons Inc Weygandt Managerial Accounting 6 e Solutions Manual For Instructor Use Only 6 1 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Time Allotted min 1A 2A 3A 4A 5A 6A 7A 8A 1B 2B 3B 4B 5B 6B 7B 8B Difficulty Level Moderate Moderate Simple Moderate Moderate Moderate Moderate Moderate Moderate Simple Moderate Moderate Moderate Moderate Description Compute break even point under alternative courses of action Compute break even point and margin of safety ratio and prepare a CVP income statement before and after changes in business environment Determine sales mix with limited resources Determine break even sales under alternative sales strategies and evaluate results Compute degree of operating leverage and evaluate impact of operating leverage on financial results Determine contribution margin break even point target sales and degree of operating leverage Prepare income statements under absorption costing and variable costing for a company with beginning inventory and reconcile differences Prepare absorption and variable costing income statements and reconcile differences between absorption and variable costing income statements when sales level and production level change Discuss relative usefulness of absorption costing versus variable costing Compute break even point under alternative courses of action Compute break even point and margin of safety ratio and prepare a CVP income statement before and after changes in business environment Determine sales mix with limited resources Determine break even sales under alternative sales strategies and evaluate results Compute degree of operating leverage and evaluate impact of operating leverage on financial results Determine contribution margin break even point target sales and degree of operating leverage Prepare income statements under absorption costing and variable costing for a company with beginning inventory and reconcile differences Prepare absorption and variable costing income statements and reconcile differences between absorption and variable costing income statements when sales level and production level change Discuss relative usefulness of absorption costing versus variable costing 20 30 20 30 10 15 20 30 20 30 20 30 20 30 20 30 20 30 10 15 20 30 20 30 20 30 20 30 Moderate 20 30 Moderate 20 30 6 2 Copyright 2012 John Wiley Sons Inc Weygandt Managerial Accounting 6 e Solutions Manual For Instructor Use Only B L O O M S T A X O N O M Y T A B L E C o p y r i g h t 2 0 1 2 i l J o h n W e y S o n s I n c W e y g a n d t M a n a g e r i a l A c c o u n t i n g 6 e l S o u t i o n s M a n u a l F o r I n s t r u c t o r U s e O n y l 6 3 Correlation Chart between Bloom s Taxonomy Learning Objectives and End of Chapter Exercises and Problems Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1 Describe the essential features of a cost volume profit income statement Q6 1 Q6 3 2 Apply basic CVP concepts 3 4 5 6 7 8 Explain the term sales mix and its effects on break even sales Q6 7 Q6 8 Determine sales mix when a company has limited resources Q6 11 Q6 10 Understand how operating leverage affects profitability Q6 12 Q6 13 Q6 15 Explain the difference between absorption costing and variable costing Discuss net income effects under absorption costing versus variable costing Discuss the merits of absorption versus variable costing for management decision making Q6 2 Q6 4 Q6 2 Q6 4 Q6 5 Q6 6 Q6 8 Q6 9 Q6 14 Q6 17 Q6 19 Q6 20 Q6 21 Q6 18 Q6 22 BE6 2 BE6 3 BE6 4 BE6 5 BE6 6 BE6 2 BE6 3 BE6 4 BE6 5 BE6 6 DI6 2 E6 1 BE6 7 BE6 8 BE6 9 BE6 10 BE6 11 BE6 15 DI6 4 Q6 16 BE6 12 BE6 13 BE6 14 BE6 16 BE6 17 BE6 18 E6 17 Q6 19 BE6 19 E6 18 E6 2 E6 3 E6 4 E6 5 P6 1A P6 2A P6 4A DI6 3 E6 6 E6 7 E6 8 E6 11 E6 12 E6 13 E6 14 E6 15 E6 16 P6 5A E6 18 E6 19 P6 7A P6 8A P6 7A P6 8A P6 7B DI6 1 P6 1A P6 2A P6 1B P6 2B P6 6A P6 1B P6 2B P6 4B P6 6B BE6 1 P6 1A P6 2A P6 1B P6 2B BE6 1 P6 1A P6 2A P6 6A P6 1B P6 2B P6 6A P6 5B E6 9 E6 10 P6 4A P6 4B P6 3A P6 3B E6 6 E6 7 E6 8 P6 4A E6 11 E6 12 E6 13 E6 14 E6 15 E6 16 P6 5A E6 18 E6 19 P6 7A P6 8A P6 8B P6 7A P6 8A P6 7B P6 8A P6 8B P6 7B P6 8B P6 6B P6 4B P6 3A P6 3B P6 6A P6 5B P6 6B P6 7B P6 8B P6 8B Broadening Your Perspective BYP6 7 BYP6 4 BYP6 5 BYP6 1 BYP6 2 BYP6 6 BYP6 9 BYP6 3 BYP6 8 BYP6 10 ANSWERS TO QUESTIONS 1 CVP or cost volume profit analysis is the study of the effects of changes in costs and volume on a company s profit 2 Managers use CVP analysis to make decisions involving break even point sales required to reach a target net income margin of safety the most profitable sales mix allocation of limited resources and operating leverage 3 4 5 6 7 8 9 Both types of income statements report the same amount of net income But the format used to reach net income differs A traditional income statement s format consists of Sales revenue cost of goods sold gross profit …
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