Ch. 3 CVP Analysis

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The contribution margin income statement
can be used to predict profits at different levels of activity
The selling price per unit minus the variable cost per unit is
the contribution margin per unit
Breakeven point is
fixed costs divided by CM/unit
Which of the following statements about calculating the breakeven point is FALSE?
A. BE Rev equal FC divided by VC/unit
B. CM - FC = 0
C. Rev = FC + VC
D. OI = 0
A
The BE decreases if
Total fixed costs decrease, or CM increases
The margin of safety is the difference between
Budgeted Rev and BE Rev
In multiproduct situations, when the sales mix shifts in favor of the highest CM margin product then
OI will increase
To determine the CM use
Variable manufacturing costs and variable non-manufacturing costs
The BE in units increases when unit costs
increase and sales price remains unchanged
CVP analysis includes some inherent, simplifying assumptions. Which of the following is NOT one?
A. Sales mix will change as FC increase beyond the relevant range
B. Costs and revenues are predictable and are linear over the relevant range
C. VC fluctuate proportionally with volume
D. Inventories do not change
A
Which of the following is a characteristic of a contribution income statement?
fixed expenses are listed separately from variable expenses
CVP relationships that are curvilinear may be analyzed linearly by considering only
a relevant range of volume
CVP analysis assumes over the relative range that
total costs are linear
In calculating the BE point for a multi product company, which of the following assumptions are commonly made when variable costing is used?
I. Sales volume equals production volume
II. Variable costs are constant per unit
III. A given revenue (sales) mix is maintained for all volume changes
All three
CVP analysis assumes that over the relative range
selling prices are unchanged
CVP analysis assumes that over the relative range
revenues are linear
CVP analysis assumes that over the relative range
unit variable costs are unchanged
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