Exam 2: Developing a Business Plan: Cost-Volume-Profit Analysis

A variable cost responds directly to changes in an activity such as sales volume.

The financial performance section of the financial plan includes projected financial statements supported by ____________________ and ____________.

Projecting a business' financial performance involves uncertainty but if guidelines are followed this uncertainty can be eliminated in the financial information.

The main problem of environmental management accounting is that there is a lack of a _________________________ of environmental costs.

The first step in starting a business is to develop a detailed business plan.

Each additional unit sold above the break-even sales volume increase profit by the sales price per unit.

A business plan:

If a business were concerned about raising the price of their goods, CVP analysis would help determine the impact on profits and the resulting changes in costs.

The business operations section of the business plan helps _______________________ evaluate the entrepreneur's ability to successfully carry out the idea.

CVP should be the only factor that influences business decisions.

The _________________________ section of a business plan includes a description of the relationships between the business, its suppliers, its customers, as well as a description of how the business will develop, service, protect and support its products or services.

What is the purpose of the marketing plan section of the business plan?

The break-even point is where total revenue is less than total costs.

Bob's variable costs are $7 per unit. His selling price is $9 per unit. His break-even point is 25 000 units. -suppose that Bob is able to make some changes to his business by increasing his original selling price by $0.50 per unit, decreasing his variable costs by $0.50 per unit and increasing his fixed costs by $10 000. a. What is Bob's new break-even point in units? b. What is Bob's profit when he sells 30 000 units? c. Assuming Bob believes he can sell 30 000 units, should Bob make the changes to his business?

______________________________ are constant in total for a specific time period and are not affected by differences in volume during that same time period.

Doggie Donuts sells treats for pets for $5 per box. The variable costs per box are $3. Doggie Donuts' fixed costs total $20 000. a. Calculate the contribution margin per box. b. Calculate the break-even point in boxes. c. Calculate the profit that Doggie would earn if sales total 30,000 units.

A fixed cost responds directly to changes in an activity for a specific time period such as sales volume.

______________________________ shows how profit is affected by changes in sales volume, selling price of products and the various costs of the business.

The financial plan describes the projected financial performance and:

The ____________________ describes the predicted growth, market share and sales of the business' products by period.