17 terms

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. 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. 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

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