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BSNS115 Exam Update 2024 | BSNS 115 Actual Exam Questions and Correct Answers Rated A+
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BSNS115 Exam Update 2024 | BSNS 115Actual Exam 2024-2025 Questions and
Correct Answers Rated A+
Cost-Volume-Profit Analysis -ANSWER-Main tool of managers for
decision making, looks at the relationship between the costs of the firm
and the volume of output they produce. Managers use this information
to investigate how each product is performing and how well the firm is
keeping costs down - vital for profit maximisation
Variable costs -ANSWER-Costs that only occur with production and
change with the level of activity
Fixed costs -ANSWER-Costs that occur regardless of production and
do not change with the level of activity
Relevant range -ANSWER-Working within a certain level of activity over
which a cost pattern exists. Once we exceed this level of activity, the
cost pattern changes (usually FC)
Linearity -ANSWER-We assume that variable costs, and by extension
total costs, increase at a constant rate as the level of activity increases
Contribution margin -ANSWER-The difference between selling price
and variable costs. It is the amount of revenue that each unit or every
unit generates to be used to pay for fixed cost of provide profit for the
firm.
Total sales - Total variable costs
,Unit contribution margin -ANSWER-Selling price per unit - Variable
costs per unit
Contribution margin ratio -ANSWER-Contribution margin / sales
Non-linear relationships -ANSWER-It is unlikely that the relationship
between sales, revenue, variable costs and sales volume is going to
follow a straight line
Stepped fixed costs -ANSWER-We assume that fixed costs all stay the
same and increase together when production exceeds the relevant
range. In reality there will be many different types of fixed costs each
with their own relevant range
Multi-product business -ANSWER-In real life, most businesses have
more than one product and fixed costs relate to multiple products. So
assigning fixed costs to one specific product becomes quite
complicated
Differential cost -ANSWER-Costs that change depending on which
alternative you choose
Opportunity cost -ANSWER-If you have to choose between activity A
and activity B, you give up the potential income of activity B by choosing
A. This income foregone from making a choice is the opportunity cost
Allocated costs -ANSWER-A cost that is common to many activities, so
is arbitrarily split between activities. Because these are previously
decided and don't relate directly to the activity, they are irrelevant for
decision making purposes e.g. rent of a factory
, Sunk cost -ANSWER-Costs that are already incurred. The firm has
already done something to cause this cost so it must be paid no matter
what decision the firm makes e.g. cost of a printer purchased last week
Quantitative analysis -ANSWER-Looking at the relevant numbers for
the decision
Qualitative analysis -ANSWER-Looking at important factors for the
decision that don't involve numbers
Product mix decision -ANSWER-Often a firm has a limited amount of
resources so managers have to decide how these scarce resources are
efficiently utilized. The goal of this decision is to allocate scarce
resources to the most profitable activities. Fixed costs aren't affected by
this decision, so focus on maximizing the total contribution margin.
- The most profitable mix of products occurs when the contribution
margin per limiting factor is maximized.
Make or buy decision -ANSWER-This decision looks at whether a firm
should buy an input to use in the production process (outsourcing) or
simply make it themselves
Quantitative analysis
- If the avoidable cost is greater than the purchase price, we should buy
- If the avoidable cost is less than the purchase price, we should make
Qualitative analysis
- Loss of control of quality
- Loss of control of timing
- Loss of control of pricing of inputs
- Potential job loss of our staff
- Our facilities going to waste
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