19A1 - Cost Accounting - Cost Volume Profit Analysis (II)

Cost-volume-profit analysis assumes all of the following except:

• total fixed costs remain the same over the relevant range

• total variable costs remain the same over the relevant range

• all costs are variable or fixed

• units manufactured equal units sold

When using conventional cost-volume-profit analysis, some assumptions about costs and sales prices are made. Which one of the following is not one of those assumptions?

• The sales price will remain unchanged per unit

• Fixed costs will decrease per unit

• The costs can be expressed as straight lines in a break-even graph

• The actual variable cost per unit must vary over the production range

Which of the following statements about determining the breakeven point is false?

• Revenues equal fixed costs plus variable costs

• Operating income is equal to zero

• Breakeven revenues equal fixed costs divided by the variable cost per unit

• Contribution margin - fixed costs is equal to zero

(a)   is equal to the difference between total revenue and total variable costs.

Margin of safety measures the difference between (a)   and breakeven revenues.