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1 year ago

In almost all multiple cash flow calculations, it is implicitly assumed that the cash flows occur at the _____ of each period.

Business

1 answer:

Sladkaya [172]1 year ago

5 0

It is assumed that the cash flows occur at the end of each period.

<h3>What is the occur period of the cash flow?</h3>

Cash flow is the statement depicts the complete information about the money received or being spent by the company during the period of time.

Cash Inflows refers to the amount received, whereas cash outflows represents the money spent by the firm.

It is generally occur in period of 90 days.

Learn more about the cash flows here:-

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1. Break-even in units is 6,000 units

2. Break-even in dollars is $720,000

3. Contribution Income Statement for 10,000 units

Sales revenue (10,000 x 120) $1,200,000

Variable cost (10,000 x 90) (900,000)

Contribution margin $300,000

Fixed cost (180,000)

Profit $120,000

4. Units to sell is 16,000

5. Dollars sale is $1,920,000

6. Contribution Income Statement for $2,400,000 sales revenue

Sales revenue (20,000 x 120) $2,400,000

Variable cost (120,000 x 90) (1,800,000)

Contribution margin $600,000

Fixed cost (180,000)

Profit $420,000

Explanation:

1. To compute the Break-even point in units,

Formula is BEP = total fixed cost / unit contribution margin

Step 1. Compute the unit contribution margin

Unit selling price $120

Less : variable cost 90

Unit contribution margin $30

Step 2. compute the unit break-even in units using the formula.

BEP = total fixed cost / unit contribution margin

BEP = $180,000 / 30

BEP = 6,000 units

2. To compute the Break-even point in dollars,

Formula is BES = total fixed cost / contribution margin ratio

Step 1. Compute the contribution margin ratio

Unit selling price $120

Less : variable cost 90

Unit contribution margin $30

So, $30 divided by $120 equals 25% (CMR)

Step 2. compute the unit break-even in dollars using the formula.

BEP = total fixed cost / contribution margin ratio

BEP = $180,000 / 25%

BEP = $720,000

3. To prepare the contribution margin income statement, we will multiply the units sold of 10,000 units by $120 to get the sales revenue. Then multiply 10,000 units by $90 to get the variable cost. Further illustration below;

Sales revenue (10,000 x 120) $1,200,000

Variable cost (10,000 x 90) (900,000)

Contribution margin $300,000

Fixed cost (180,000)

Profit $120,000

4. To compute the units to sell to realize the target profit we will use the formula:

(Total fixed cost + Target profit )/ unit contribution margin

Step 1. Compute the unit contribution margin

Unit selling price $120

Less : variable cost 90

Unit contribution margin $30

Step 2. compute the units to sell using the formula.

(Total fixed cost + target profit) / unit contribution margin

($180,000 + $300,000) / 30

Answer is 16,000 units

5. To compute the sales in dollars to realize the target profit of $300,000,

Formula is (Total fixed cost + target profit) / contribution margin ratio

Step 1. Compute the contribution margin ratio

Unit selling price $120

Less : variable cost 90

Unit contribution margin $30

So, $30 divided by $120 equals 25% (CMR)

Step 2. compute the target sales in dollars using the formula.

(Total fixed cost + target profit) / contribution margin ratio

($180,000 + $300,000) / 25%

$480,000 / 25%

Answer is $1,920,000

6. Contribution Income Statement for $2,400,000 sales revenue. FIRST we must determine how many unit are sold to have that sales revenue. $2,400,000 sales revenue divided by unit selling price equals 20,000 units. To further illustrate, see presentation below.

$2,400,000 / $120 = 20,000 units

Sales revenue (20,000 x 120) $2,400,000

Variable cost (120,000 x 90) (1,800,000)

Contribution margin $600,000

Fixed cost (180,000)

Profit $420,000

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