P&L Ownership & Cost Reduction Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 P&L Ownership & Cost Reduction flashcards as text
A plant's fixed costs total $900,000 per month and variable cost per unit is $15. If the selling price is $30 per unit, what is the monthly break-even volume?
Answer: 60,000 units
Break-even = Fixed Costs ÷ Contribution Margin per Unit = $900,000 ÷ ($30 – $15) = 60,000 units.
When evaluating a make-vs-buy decision for a component currently produced in-house, which cost should be EXCLUDED from the analysis?
Answer: Sunk cost of equipment already purchased and fully depreciated
Sunk costs are irrelevant to forward-looking decisions because they cannot be recovered regardless of the choice made.
A plant manager is reviewing the spending variance for indirect labor. This variance is best described as:
Answer: The difference between actual indirect labor cost and the budgeted cost for actual output
A spending variance compares what was actually spent on indirect labor against what was budgeted to be spent for the actual level of output, isolating cost control performance.
Total Productive Maintenance (TPM) primarily reduces which P&L line item?
Answer: Manufacturing overhead and maintenance expense within COGS
TPM reduces unplanned downtime and maintenance costs, which are captured in manufacturing overhead—a component of COGS.
A plant manager is asked to achieve a 10% reduction in material costs. Supplier consolidation and volume leverage is already maximized. The NEXT most effective lever is typically:
Answer: Design-to-cost engineering to reduce material content or substitute less expensive materials
Design-to-cost (value engineering) attacks material costs at the specification level, enabling substitutions or reduction in content that procurement negotiations alone cannot achieve.
Which statement about contribution margin is CORRECT in the context of plant P&L management?
Answer: Contribution margin equals revenue minus total variable costs and represents coverage for fixed costs
Contribution margin (revenue minus variable costs) shows how much each unit contributes toward covering fixed costs and generating profit once fixed costs are covered.
A plant's actual scrap cost for the month is $85,000 against a standard of $40,000. Which management action is most appropriate?
Answer: Initiate a formal corrective action process to identify and eliminate scrap root causes
A scrap variance more than double the standard warrants a structured root-cause investigation and corrective action to prevent recurrence and restore cost performance.