Wiley P2 Sec-C Flashcard

What is the Breakeven Point in C-V-P analysis? Breakeven is defined as the level of sales and activity volume at which revenues exactly offset total costs, both fixed and variable. 2 FC..FC006_1709 What is the “key activity” for an organization determining its C-V-P analysis? The key activity is what primarily drives costs and revenues and can be defined as almost anything for any organization (items sold for a retail store, feet drilled for an oil driller, billable hours for a law firm, etc.). 3 FC.risk.u.FC006_1709 How is sensitivity analysis performed with the C-V-P formula? While holding the other inputs constant, adjust one of the four C-V-P inputs (price, volume, variable cost rate, total fixed costs) to reflect the possible range of uncertainty for that input. Then determine if the impact on profit is unacceptable. 4 FC..FC005_1709 What is Target Costing and the Target Costing formula? When organizations do not have the ability to set prices in their marketplace (i.e., they are “price takers”), they use the market price to target the cost needed to achieve desired profit. Targeted Cost = Price ÷ (1 + Markup%)